1818thth Annual Investment Annual Investment Security Group Client Security Group Client

Event Event

September 28, 2011September 28, 2011

Overview and Overview and Current Current

PositioningPositioning

TodayToday 22008008

Stocks Stocks 28%28% 62%62%

““Hybrid” Hybrid” 17% 17% 20% 20%

Bonds/Cash Bonds/Cash 55%55% 18% 18%

Underweight StocksUnderweight Stocks

““Textbook” Weighting in BondsTextbook” Weighting in Bonds

Shifted Bond Strategy Shifted Bond Strategy

Raised Some CashRaised Some Cash

Bias Towards IncomeBias Towards Income

INCOMEINCOME + + Appreciation = Appreciation =

Total ReturnTotal Return

Looking Ahead: Looking Ahead:

Better Ways to Manage RiskBetter Ways to Manage Risk More Income-Producing More Income-Producing

AlternativesAlternatives

Bottom-fishing for Cheap AssetsBottom-fishing for Cheap Assets

The World is FlatThe World is Flat

BRIC’S BRIC’S BBrazil, razil, RRussia, ussia, IIndia, ndia, CChinahina

Large Young Populations – Large Young Populations – Make and Move MarketsMake and Move Markets

Low Labor Costs with Low Labor Costs with Increasing ProductivityIncreasing Productivity

Low Consumer Debt LevelsLow Consumer Debt Levels Motivated Emerging Motivated Emerging

ConsumersConsumers

Demographics Powering EM Demographics Powering EM

GrowthGrowth

74 M74 M (size of France)(size of France) China’s Population China’s Population Growth Growth Over the Last 10 yrsOver the Last 10 yrs

643 M643 M Chinese Urbanites 2011Chinese Urbanites 2011

925 M 925 M Chinese Urbanites 2025Chinese Urbanites 2025

282 M282 M (size of US)(size of US) Chinese Migrate to City by Chinese Migrate to City by 20252025

200 M 200 M Indian’s Migrate to City by Indian’s Migrate to City by 20252025

1.2 B 1.2 B EM Middle Class in 2030EM Middle Class in 2030

Catalysts For GrowthCatalysts For Growth

10 M 10 M

100 M100 M

4040

8.9%8.9%

5.5%5.5%

1.9%1.9%

10x/310x/3

Miles of Chinese roads/rail Miles of Chinese roads/rail lines neededlines needed

Needed Chinese Needed Chinese apartmentsapartments

% Indian’s without % Indian’s without electricityelectricity

CAGR of Chinese per capita CAGR of Chinese per capita incomeincome

CAGR of Indian per capital CAGR of Indian per capital incomeincome

CAGR of US per capital CAGR of US per capital incomeincome

BRIC’s vs. US population / BRIC’s vs. US population / % car owners % car owners

Global Consumption Global Consumption

20072007 20102010 20152015 20202020

U.S.U.S. 30.230.2 27.427.4 23.523.5 20.820.8

ChinaChina 5.35.3 9.39.3 16.416.4 21.121.1

JapanJapan 8.28.2 7.47.4 6.56.5 5.85.8

GermanGermanyy

5.65.6 5.15.1 4.34.3 3.83.8

IndiaIndia 2.02.0 2.62.6 3.93.9 5.35.3

Asia Asia (ex (ex Japan)Japan)

12.112.1 17.117.1 25.825.8 32.332.3

Economic Power Economic Power

ChinaChina

• Worlds #2 economyWorlds #2 economy• Largest consumer of copper, tin, steel, Largest consumer of copper, tin, steel,

coal, aluminum & seaborne iron orecoal, aluminum & seaborne iron ore• #2 Consumer of oil#2 Consumer of oil• #1 Potash importer#1 Potash importer• #1 Internet market (22% penetration)#1 Internet market (22% penetration)• #1 Auto sales in 2010#1 Auto sales in 2010• $2.3 Trillion/Yr consumer spending by $2.3 Trillion/Yr consumer spending by

20252025

Economic Power – Economic Power – con’tcon’t

Asia Asia Worlds # 1 mobile phone marketWorlds # 1 mobile phone market Worlds #1 LCD TV marketWorlds #1 LCD TV market Worlds # 1 Health Care Market (# patients)Worlds # 1 Health Care Market (# patients) In 2007, 8 of top 50 urban areas In 2007, 8 of top 50 urban areas By 2025, 20 of the top 50 urban areasBy 2025, 20 of the top 50 urban areas Shanghai and Beijing GDP’s higher than L.A. or Shanghai and Beijing GDP’s higher than L.A. or

LondonLondon

BRIC’s BRIC’s In 2005, 27 Fortune 500 BRIC basedIn 2005, 27 Fortune 500 BRIC based In 2010, 67 Fortune 500 BRIC basedIn 2010, 67 Fortune 500 BRIC based

Investment StrategyInvestment Strategy

US Companies with Global PresenceUS Companies with Global Presence 47% S&P 500 Sales Offshore47% S&P 500 Sales Offshore Consumer Goods, Farm EquipmentConsumer Goods, Farm Equipment 43% of World Market 43% of World Market

Developed Markets Feeding EM DemandDeveloped Markets Feeding EM Demand Australia, New Zealand, Canada and Australia, New Zealand, Canada and

Germany Germany 43% of World Market43% of World Market

EM FundsEM Funds 14% of World Market14% of World Market

Corporate Corporate ProfitsProfits

Historical EarningsHistorical Earnings

$1,000,000 $1,000,000 ProfitsProfits

16 x $1,000,00016 x $1,000,000

$16,000,000 or 16 P/E$16,000,000 or 16 P/E

Cash Flow 6.25%Cash Flow 6.25%

12 x $1,000,00012 x $1,000,000

$12,000,000 or 12 P/E$12,000,000 or 12 P/E

Cash Flow 8.33% Cash Flow 8.33%

P/E Ratio P/E Ratio

Dr. Brad NiederDr. Brad NiederThe Healthy The Healthy

Humorist Humorist