Mac Outlook 2011 Will not recognize local folders (Setting up Rules)

I have folders for emails from specific users under the 'On My Computer' directory in my Outlook.

These are imported from Outlook 2010 on a Windows PC.

My inbox is now flooded and when I select an email, create the rule

"From Is (person)

Move to Folder"

It asks you to select the folder and search for it. It doesn't matter what name I type in, none of them show up.

Help!?

(would attach a screen shot but do not see the option)

Question about Outlook Express