As public pension funding gaps and municipal fiscal challenges continue to make headlines, we believe that it is more important than ever for investors to take a differentiated view of the municipal bond market and understand which sectors are likely to be affected and how. The potential impact from rising pension costs will not be uniform across the market, and about 65% of the market should see little or no impact from pensions. Revenue bond sectors such as public power, toll roads, and water and sewer have limited amounts of labor-related expenditures which reduces their pension exposure. The greatest impact from pensions will be on state and local governments, which represent only about 35% of the municipal bond market. Although public pension funding levels are recovering from their recession lows, landmark bankruptcy cases and ongoing fiscal concerns are keeping the spotlight on pension reform and potential effects on state and local bonds. We believe that most state general obligation (G.O.) and unlimited tax local G.O. bonds should withstand pressure from pension liabilities; whereas local appropriations debt, limited tax local G.O.s at their tax rate limit and state G.O. credits with weak pension liability management could be most vulnerable. While the pension funding issue is serious and might reduce the amount of revenues available to pay debt service on municipal bonds, Standish does not believe it will lead to widespread insolvency and defaults in the municipal market. Deep municipal bond credit expertise will continue to be key for staying on top of shifting risks and opportunities.