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P e r s p e c t iv e s o n t h e F in a n c ia l S t o rm

HomeHomeLoansLoans

HomeHomeLoansLoans

HomeHomeLoansLoans

Securitized loans reduce investor risk

Mortgage Backed Security

It b e g a n w it h C h e a p C r e d it

Bundled together

Sliced into Time Tranches

1 perceived as very safe

Extended loan packaging

ConsumConsumerer

LoansLoans

AutoAutoLoansLoans

HomeHomeLoansLoans

11

22

33

SubprimSubprimee

LoansLoans

Risk Grows

A Popular ProductA Great Profit Engine

Market Excesses Emerge:

Risk UnderestimatedLax Oversight

Companies, Banks face Capital Calls

Need for credit, liquidity, fast

Fire sale of liquid Assets – stocks,

bondsLower prices = Lower asset values pressure on levered institutions, Banks

A Vicious Selling Cycle

Investor panicMarkets crash

Economy slows , Credit bubble bursts

Tid a l w a v e o f w o r r ie d m o n e y r u n s t o t h e s id e lin e s

Data source: Federal Reserve; Wedgewood Partners Inc.

2 0 0 8M a r k e t P a n ic o f

5 0 0 1 0 . S & P C o m p o s it e y r a n n u a liz e d R e a l R e t u r n s

source : www. Dshort.com

Lack of Confidence

Insolvency

No C

redit

Economic Activity

Spen

ding

Cre

dit

Gua

rant

ees

Mar

ket F

orce

s

Mar

ket F

orce

s

Federal Government Steps in to Halt the slide

Federal action seeks to restore balance and faith

12.8 Trillion Dollars

MARKET FORCES

GOVERNMENT

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F in a n c ia l C o lla p s eA v e r t e d

The Uphill Battle to Recovery

• Banks need to de-leverage, raise more capital

• Credit markets remain frozen

• High debt defaults rates persist

• Commercial and residential real estate price declines continue

• Government debt burden 80% of GDP

• World economy weak

M y F in a n c ia lF u t u r e

The Anxiety Pyramid

Overwhelmed

Burdened

Paralysis

Fear

Catastrophe

Are we at the bottom? How long will it take for my portfolio to recover

(wrong question - speculation)

How do I position my portfolio and generate the income I need for short and long term?

(right question)

1 . R e g a in F in a n c ia l S e c u r it y

Ad d r e s s F e a r s F ir s t

Historical Truths on Markets

Asset allocation accounts for over 90% of returns

Short term market swings are unknowable

Markets revert to the mean over the long term

Systematic disciplined investing builds wealth

( H is t o r ic a l R e t u r n s In f la t io n)Ad ju s t e d

Source : 1802- 1998 Jeremy J. Siegel, “The shrinking equity premium”: Historical facts and future forecasts1999-2008 : Wilshire, Standard and Poors Zephyr, Federal Reserve past performance is no guarantee of future results.

: Lo n g Te rm F o c u s S t a b le S t r a t e g ic B le n d Ac r o s s A s s e t C la s s e s

2 . A S t r a t e g ic P o r t f o lio

1 . R e g a in F in a n c ia l S e c u r it y

Strategic Core

Bi-Annual Tactical

Dynamic Rebalanc

e

Passive &

Active

The Multi- faceted Asset Allocation Process

Customized Diversified allocation across 14 asset classes

Strategic Core

GV Orientation-Value-International

Rigorous Back Tested Models

Bi-Annual Tactical

12 Point Tactical Analysis

Macro Economic Factors

Market Conditions

Relative Valuation

Active Periodic Rebalance

Dynamic Rebalance

StocksBonds

Tax Loss Capture

Money Manager Selection

Passive &

Active

Passive Management through ETF’s

Style Purity

Long Term Performance

Manager Investment in the Fund

Disciplined Process for Securities Selection

Active and Continuous Due Diligence

Annual Review - 50 point Questionnaire

Quarterly Conference Calls

Personal Visits

Weekly News Search

Monthly Quantitative Reports

2 . A S t r a t e g ic D iv e r s if ie d P o r t f o lio

1 . R e g a in F in a n c ia l S e c u r it y

3 . R is k s a n d O p p o r t u n it ie s

Risks &

ImbalancesImbalancesImbalances

Inflation

Global

Recession

Credit Freeze

High Debt

DeflationConsumer

Im b a la n c e s D r iv e O p p o r t u n it ie s

For illustration purposes only; it has not been determined whether any or all of these recommendations would be appropriate for client portfolios in light of clients needs and risk tolerance

Real EstateLiquidityPremium

Low Prices,Bargains

ArtificiallyLow Interest

Rates E x p lo r e B r o a d e r O p t io n s

QUESTIONS

DOFU 4/2009

GVFA 2009 0047