Annual Investment Annual Investment Update Update

September 29, 2010September 29, 2010

Investment Security Group, Inc

Ranking of Countries by GDP Courtesy. IMF 2009

Rank Rank CountryCountry GDP GDP ($ trillions)($ trillions)

WORLDWORLD 69.869.8

11 U.S.U.S. 14.314.3

22 ChinaChina 8.88.8

33 JapanJapan 4.24.2

44 IndiaIndia 3.53.5

55 GermanyGermany 2.82.8

66 United KingdomUnited Kingdom 2.12.1

77 RussiaRussia 2.12.1

88 FranceFrance 2.12.1

99 BrazilBrazil 2.02.0

1010 ItalyItaly 1.71.7

Get Global! Overseas Markets generate 75% of the Overseas Markets generate 75% of the

world’s gross domestic productworld’s gross domestic product 75% of publicly traded companies are 75% of publicly traded companies are

listed on foreign exchanges listed on foreign exchanges 95% of world’s population is outside 95% of world’s population is outside

the USAthe USA Since 1965, global income, per capita Since 1965, global income, per capita

has risen ten-foldhas risen ten-fold

“The Good, the Bad and the Not-So-Ugly”

“The Good”Developed AsiaDeveloped Asia

Hong KongHong Kong

SingaporeSingapore

Emerging Emerging MarketsMarkets

BRIC’s Plus:BRIC’s Plus:

Chile Czech RepChile Czech Rep

Korea ColumbiaKorea Columbia

Hungary PhilippinesHungary Philippines

Mexico Poland Mexico Poland

Taiwan Peru Taiwan Peru

Turkey ThailandTurkey Thailand

Malaysia IndonesiaMalaysia Indonesia

South Africa South Africa

Frontier MarketsFrontier Markets

Kenya KuwaitKenya Kuwait

Tunisia JordanTunisia Jordan

Tobago LebanonTobago Lebanon

Argentina SerbiaArgentina Serbia

Pakistan CroatiaPakistan Croatia

Srilanka RomaniaSrilanka Romania

Vietnam UkraineVietnam Ukraine

“ The Good”

Improved Economic FundamentalsImproved Economic Fundamentals Less debt (34% vs. 85% for Dev Mkts)Less debt (34% vs. 85% for Dev Mkts)

“The Good” (Continued)

Improved Economic Fundamentals Improved Economic Fundamentals Less Debt (34% vs 85% for Dev Mkts)Less Debt (34% vs 85% for Dev Mkts) Large Foreign exchange reserves Large Foreign exchange reserves Effective Monetary PoliciesEffective Monetary Policies

(3.5% cpi vs. -.8%)(3.5% cpi vs. -.8%)

“The Good” (Continued)

Burgeoning Consumer DemandBurgeoning Consumer Demand Younger populationsYounger populations Rapidly increasing incomesRapidly increasing incomes Low household debtLow household debt

E. Asia:E. Asia: 30%30%E. Europe:E. Europe: 22%22%L.A.:L.A.: 11.7%11.7%USA:USA: 100%100%

Undervalued currenciesUndervalued currencies

“The Good”(Continued)

Higher economic growthHigher economic growth

“The Good”(Continued)

Deeper, more seasoned financial markets Deeper, more seasoned financial markets

“The Bad” (Developed Europe)

Troublesome Economic FundamentalsTroublesome Economic Fundamentals High Debt LevelsHigh Debt Levels Aging Populations Aging Populations Stifling welfare systemsStifling welfare systems Overvalued Currency?Overvalued Currency? Central bank “disconnect” with country-specific issuesCentral bank “disconnect” with country-specific issues

Will the Union Hold? Will the Union Hold?

“ The Not-So-Ugly”(USA)

Similar to Europe, but the 3 D’s are not as Similar to Europe, but the 3 D’s are not as extreme (debt, deficits, demographics)extreme (debt, deficits, demographics)

More responsive central bank policies More responsive central bank policies (better coordination between monetary and (better coordination between monetary and fiscal policy)fiscal policy)

Impressive Corporate Productivity/Profit Impressive Corporate Productivity/Profit Margins, healthy cash flow, balance sheets.Margins, healthy cash flow, balance sheets.

High Unemployment, soft housing, high High Unemployment, soft housing, high household debt, threat of heavier regulation.household debt, threat of heavier regulation.

In Summary

Emerging Markets:Emerging Markets:

Developed Europe/Japan:Developed Europe/Japan:

USA:USA:

TailwindsTailwinds

HeadwindsHeadwinds

Swirling WindsSwirling Winds

Investing Implications ?

Get in front of the tailwind! Get in front of the tailwind! Increase emerging market exposure…..but buy Increase emerging market exposure…..but buy

at the at the rightright price. price.

Look for diamonds in the rough.Look for diamonds in the rough. Think contrarian. Shop for bargains in developed Europe Think contrarian. Shop for bargains in developed Europe

and Japan.and Japan.

Don’t quit on the USA! Don’t quit on the USA!

“The US economy remains almost comatose…The current slump already ranks as the longest period of sustained weakness since the great depression…Once in-a-life dislocations…will take years to work out among them: the job drought, the debt hangover, the defense industry, industry contraction, the [banking] collapse, the real estate depression, the health care cost explosion and the runaway federal deficit.”

Time Magazine

September 1992September 1992

Stock Market Exposure(Moderate Approach)

TodayToday

US:US: 30%30%

Foreign:Foreign: 16%16%

46%46%

TomorrowTomorrow

Global Equity:Global Equity: 30%30%

Developed Mkts:Developed Mkts:10%10%

40%40%

Stock Market Exposure(Moderate Approach)

Overall Allocation

TodayToday

Stocks: 46%Stocks: 46%

Hybrid: 21%Hybrid: 21%

““Defense:” 33%Defense:” 33%

TomorrowTomorrow

Stocks:Stocks: 30% 30%

EMKTs:EMKTs: 10%10%

40%40%

Hybrid:Hybrid: 10% 10%

““Defense” 50%Defense” 50%

Stay Nimble

Flexible Allocations (Moderate Approach)

Risk OffRisk Off

Stocks 20%Stocks 20%

Hybrid 20%Hybrid 20%

Defense 60%Defense 60%

NeutralNeutral

Stocks 60%Stocks 60%

Defense 40%Defense 40%

Risk OnRisk On

Stocks 70%Stocks 70%

Defense 30%Defense 30%

Shore Up the Defense!

Economics for GeologistsBy Mike Dibala

Plate Tectonics

Earths surface made up of large platesEarths surface made up of large plates Plates in constant motionPlates in constant motion Move at different speeds, different Move at different speeds, different

directionsdirections Where two plates move against each other Where two plates move against each other

geologic “hot spots” exist resulting in geologic “hot spots” exist resulting in increased activity (earthquakes, volcanoes, increased activity (earthquakes, volcanoes, mountain building etc.)mountain building etc.)

Sound like the global economy?

What are some of the “hot What are some of the “hot spots”?spots”?

Some “Hot Spots”

East vs. West East vs. West

Old Financial Systems vs. New Old Financial Systems vs. New

Thank You!

Investment Security Group, Inc.Investment Security Group, Inc.

303-759-9808303-759-9808

www.investsg.comwww.investsg.com