MONDAVI FOLLOWS A FULL-REPLICATION APPROACH IN WHICH PORTFOLIO PERFORMANCE WILL MATCH THE FIXED-INCOME BENCHMARK’S PERFORMANCE

1. Mondavi follows a full-replication approach in which portfolio performance will

match the fixed-income benchmark’s performance. Mondavi’s portfolio sector weights,

duration, convexity, and term structure match those of the benchmark. Smithers’s

portfolio characteristics do not match the benchmark’s because Smithers has minor risk

factor mismatches with the benchmark.