Quarterly Investment Briefing November 9, 2011

1. QuarterlyInvestment BriefingNovember 9, 2011 John S. Seidl, CFA Stephen J. Nilles, CFP

2. Capital Market Returns Current and Annualized thru 9/30/2011

3. October Returns • U.S. Equities 11.5% • Developed International Equities 10.7% • Emerging Market Equities 12.6% • Fixed Income 0.1%

4. The Euro debt crisis continuesThe dominant issue and the greatest threat • European governments are deferring decisions (and they aren’t alone!) • The market is getting impatient • Investors want decisive action; a plan to contain crisis Until policymakers come to a permanent solution, expect: • Extreme market volatility • Trading on speculation and rumor • SENTIMENT will drive the market Source: Russell

5. Effectiveness of U.S. policy optionsStimulating the U.S. economy • To encourage Americans to borrow, invest, buy or refinance • Lower long-term interest rate • Lowermortgage rates What is the Fed’s intent? • Fed buys $400B worth of long-term Treasuries • Fed sells $400B worth of short-termTreasuries What is the 9-month Operation Twist?(October 2011 - June 2012) • Expected impact is weak – 10-year treasury yield might go down by 20bp for a brief time • More policy action is not out of the question (think Quantitative Easing 3) Russell’s opinion on Fed actions: Source: Russell

6. Some Recent Positive Economic News • Recent economic data is quieting double-dip fears: • 11/4 US Unemployment falls to 9%, a six-month low • 11/4 Non-farm payrolls up 80,000; September revised to 158,000 • 11/2 ISM Non-Manufacturing Survey: 52.9 • 11/1 ISM Manufacturing Survey: 50.8 • 10/26 Durable Goods Orders increased 2.4% m/m • 10/17 US Industrial Output increased 0.4% m/m • 10/14 Rise in US Retail Sales: 2% annualized • 10/10 Lending at commercial banks grows for 4 consecutive months Source: Capital Economics

7. Most economic indicators still look okay

8. Business and consumer balance sheets remain strong

9. Inflation in the United States:Repeat of 1974 or 1980 is unlikely

10. Investors prefer the liquidity of U.S. Treasuries

11. Equity valuations

13. Market observations & outlook 1 3 2 Restructuring of troubled debt is inevitable. Governments continue to “kick the can” and the markets respond accordingly Policy brinksmanship hammering risk assets Flight to safety – anything but safe Perceived safe havens often not ideal for meeting long term financial goals 4 Fundamental economic improvements underway, but too weak to dispel gloom We currently forecast a 70-75% chance of economic expansion with a 25% chance of recession Diversified portfolios have served investors well since low of March 2009 - this still holds true Fundamentals suggest attractive valuations, however sentiment could drive markets. Even with downward revisions, we continue to expect equities to appreciate from here Source: Russell

14. Intra-Year Volatility, In Historical Context Taking the long view on stocks: Nearly every significant up year for the stock market has also had a significant intra-year decline. This suggests a positive 2011 annual return remains a possibility and that attempting to time market bottoms is futile. Sources: Fidelity, BLS, FactSet, JP Morgan Asset Management

15. Sentiment is driving stock markets(not fundamentals) Source: Russell

16. Allocation to Alternatives Dampens Volatility • 3rd Quarter 2011 Returns • Absolute Strategies + 1.6% • PIMCO All Asset - 6.4% • Forward Tactical Growth - 3.1% • Altegris Managed Futures + 3.2% • Russell Global Real Estate - 19.0% • Russell 3000 Index - 15.3% • MSCI EAFE (Net) - 19.0% • MSCI Emerging Markets (Net) - 22.6%

17. ITC Portfolio Allocation Equity Strategies August 29, 2011

18. ITC Portfolio AllocationAlternative Strategies August 29, 2011