RCT Fund Performance

The RCT fixed-income programs produced remarkably strong results in 2009, more than recouping the prior year’s losses as market conditions normalized. The Fund’s sub-advisers demonstrated patience based on decades of experience and reaped strong gains by holding positions through the illiquid conditions of late 2008 and by tactically trading to capture opportunities in early 2009.

The RCT Flex Cash Fund generated a total return of 0.15%, slightly less than the Merrill Lynch 91-Day Treasury Bill benchmark’s 0.21% return. The Fund’s positive return was entirely attributable to the first half of the year, prior to the maturing of legacy positions that offered higher yields and required reinvestment at lower yields. At the beginning of 2009, the Fund’s yield-to-maturity was over 1%, although that fell off rapidly due to the Fund’s then-90-day average maturity. At mid-year, the RCT Trustees and CBIS authorized an extension of average Fund maturity as well as a partial fee waiver given the difficult yield environment.

The RCT Short Bond Fund returned 7.44% for 2009, a performance well in excess of the Merrill Lynch 1-3 Year Treasury Index’s 0.79% return. A substantial yield advantage over the Index and sound sector allocation contributed to these strong results as the bond market recovered from the financial trauma of late 2008. The Fund experienced significant growth in assets during the year, as many CBIS participants sought to enhance low cash yields.

The RCT Intermediate Diversified Bond Fund returned 18.4% (Class B, 18.58%), far exceeding the Barclays Capital Aggregate Index’s 5.93% return. This performance more than recouped the Fund’s relative shortfall in 2008, when credit markets froze and trading came to a halt following the Lehman Brothers bankruptcy, and was achieved by taking substantial positions in sound issues in the corporate, commercial mortgage-backed and asset-backed sectors of the market at historically wide spreads. In addition, tactical purchases and sales during the period of high volatility and illiquidity early in the year added additional value. By year-end, the Fund had significantly increased its short-maturity Treasury exposure as gains were realized in other sectors.