Semi‐Annual Board Update

I d i Introduction

Portfolio engineering methodology Portfolio engineering methodology

Fund compositionFund composition

Performance

Current economic conditions and future b lrebalancing

Fund Manager – Joe Downs Amol Agarwal Andre Shearer Andy Harper Ben Hawthorne Jameson Bennett Jon Kielmeyer Praveen Gujarj

f Global diversification across asset classes

f l l Core portfolio to preserve capital

d l l l Fundamental analysis overlay

Learning experience

Blend/Style/Focus

Asset Allocation

Blend/Style/FocusResearch and Gathering Data

F d t l 

Industry Allocation

Fundamental Analysis and Security Selection

Collect Historical  Calculate Variance, d d

Calculate Variance, Returns for the 

Universe of Asset Classes

Expected Return, and Covariance  for Various 

Asset Classes

,Expected Return, and 

Sharpe Ratio for Portfolio

Ch t•Charter• Priors

Adjust Asset Class WPC Gl b l Di ifi d  OptimizationAsset Class Weights

WPC Global Diversified Portfolio

Optimization

Fund Composition ‐ Broad Asset Classes

16%

22%

12%US Equities ‐ SPY

US Equities ‐ Individual 

50%

Stocks

International Funds

Fixed Income

Build a global diversified portfolio Gain exposure to markets with low pcovariance with US equities

Gain access to emerging markets Gain access to emerging marketsModerate US economic growth expectation

Research on global economic situation and individual countries

f l b l Portfolio optimization to obtain initial portfolio weight

d f f l h f Modify portfolio weight after group discussion

l d d l Select ETFs to gain access to individual countries

Short list of ETFs that are in line with the fund’s objectivej

Select ETFs with five years of history Analysis of ETF holdings Analysis of ETF holdings Select ETFs with high liquidity and low expense ratios

Diversification Gain access to fixed income markets Low covariance with US equities Defensive investment in the case of  Defensive investment in the case of double‐dip recession

Duration and average maturity IntermediateIntermediate Inflation expectationsCredit q alit I t t R t S iti it Credit quality

ETF with low feesHigh

Interest Rate Sensitivity

uality

VGIT Medium

Low

Credit Qu

Low  Medium  High

Core/satellite strategy Capital preservation Fundamental analysis and learning experience Fundamental analysis and learning experience

Industry allocationy Selected industries based on optimization and priors

Security selectionSecurity selection LargeCap blend Fundamental analysis

USEquity AllocationUS Equity Allocation   

Industrials

9%10%24%

Materials

Financials

7%

10%

8%11%

12%

9%Energy

IT

Consumer Discretionary/Retail

Consumer Staples

Real Estate

Standard & Poor’s 500 Index – 65%

k d MSCI Emerging Markets Index – 23%

l l d d Barclays  Capital Aggregate Bond Index – 12%

Performance SummaryTotal Return 1.03%Benchmark Return 3.49%Alpha ‐2.46%Benchmark Sharpe 0.78         Portfolio Sharpe 0.24       

Attribution MetricsAsset Allocation 0.70%Security Selection ‐2.02%Interaction Effect ‐1.13%

Recession Declared Over and Economy Recovering

Jobless Claims Dropping Following RecessionJobless Claims Dropping Following Recession

Manufacturing Showing Signs of Improvement Following Recession

Moderate recovery through Q4 2010 and 2011

h Overweight equities

d h f d d d f Underweight fixed income and defensive positions

f Portfolio optimization/engineering process

f d f d Importance of diversification and asset allocation

Bloomberg and other research tools

Strength of efficient markets

8%

6%

2%

4%

0%

2%

‐2%

10/4/10 10/11/10 10/18/10 10/25/10 11/1/10 11/8/10 11/15/10 11/22/10

MSCI EM

WFC I tl

‐4%WFC Intl

i h

Interest Rate Sensitivity

CumulativeReturn

VGIT ‐1.00%

High

Medium

Credit Quality

Barclays ‐0.93%Low

Low  Medium  High

CumulativeReturn

MOS 19.83%FCX 15.82%GLD 4.45%WPC Mining 13.03%SPDR XME 15 60%SPDR XME 15.60%

10%

12%SPDR Technology

WPC Technology Securities

%

6%

8%

0%

2%

4%

‐4%

‐2%10/4/2010 10/11/2010 10/18/2010 10/25/2010 11/1/2010 11/8/2010 11/15/2010 11/22/2010

‐8%

‐6%

10%SPDR Fi

8%

SPDR Finance

WFC Finance

4%

6%

%

2%

‐2%

0%

10/4/10 10/11/10 10/18/10 10/25/10 11/1/10 11/8/10 11/15/10 11/22/10

‐4%

10%

WPC IndustrialsCumulative

8%

WPC Industrials

SPDR IndustrialsReturn

ETN 18.94%LMT ‐2.97%MMM ‐2.36%WPC IND 2 99%

4%

6%WPC IND 2.99%SPDR XLI 6.42%

2%

0%

‐2%

10/4/2010 10/18/2010 11/1/2010 11/15/2010

CumulativeCumulativeReturn

ReturnSE 7.73%NOV 41.61%XOM 14.38%WPC Energy 19.48%SPDR XLE 12 56%

SE 7.73%NOV 41.61%XOM 14.38%WPC Energy 19.48%SPDR XLE 12 56%SPDR XLE 12.56%SPDR XLE 12.56%

CumulativeReturn

TGT 6.53%HD ‐1.49%WPC Retail 2.20%SPDR XRT 13.86%

10%

SPDR REITCumulativeR

6%

8% WPC REIT SecuritiesReturn

VTR ‐0.46%PSA 0.98%WPC REIT 0.14%

4%

SPDR RWR 1.98%

0%

2%

‐2%

%

10/4/2010 10/18/2010 11/1/2010 11/15/2010

‐4%

6%CumulativeReturn

4%

5% SPDR Consumer Staples

WPC Consumer Staples

CL 3.47%KMB ‐5.12%K ‐3.16%WPC CS ‐1.20%SPDR XLP 3.45%

%

3%

4%

1%

2%

‐1%

0%

10/4/2010 10/11/2010 10/18/2010 10/25/2010 11/1/2010 11/8/2010 11/15/2010

‐3%

‐2%

KMB Announces disappointing quarterly earnings