September 30, These government programs have helped stabilize the economy over the last year.

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1 September 30, 2009 Macro Economic Update The International Monetary Fund has recently projected that global writedowns on loans and investments will total $3.4 trillion between 2007 and The banking sector as a whole wrote down $1.3 trillion so far, while carrying exposure to $1.5 trillion more toxic debt. Roughly 35% of the forecasted losses would be incurred by U.S banks, 30% in the Eurozone and over 20% in the U.K. alone. To put things in perspective, the World Bank estimates that the U.S. represents 24% of world gross domestic product (world GDP equals $60 trillion), while the Eurozone represents 23% and the U.K. amounts to 4%. As an aside, China s growing share is under 7%, with India at 2% of world GDP IMF Forecast Cumulative Global Total Writedowns $3.4 trillion U.S. Eurozone U.K. Rest of world Share of Forecasted bank losses 35% 30% 20% 15% Current Share of World GDP 24% 23% 4% 49% Allowing for each nation s particularities, authorities have coordinated massive rescue efforts to contain the financial crisis. Between the Federal Reserve, the U.S. Treasury, the FDIC and HUD, the U.S. government has made an estimated $11.6 trillion available in various forms of financing, bailout money, stimulus, cash-for-clunkers, etc. Out of that, about $4.5 trillion has been spent, invested or loaned so far. These government programs have helped stabilize the economy over the last year. What a difference a year makes At the peak of the market on October 9, 2007 the largest U.S. financial companies were worth $1.87 trillion. After the demise of Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, AIG, Wachovia, National City, Washington Mutual and Countrywide, the biggests total market value had dropped to $290 billion (at the lowest point, March 2009). Today they are collectively valued around $1 trillion. *

2 Global equities investors recorded extraordinary damage to their liquid assets. In total, over the 12 month period ending at the market bottom in March 2009, $24 trillion of worldwide equity wealth had been obliterated (temporarily). Money managers raised lots of cash, reaching upwards of $3.5 trillion, by selling subprime and prime mortgage-backed securities (MBS), alternative investments (banker speak for stuff hardly anybody understands), high-yield (junk) bonds, global equities, and conservative corporate bonds. They sold indiscriminately. In time, the selling subsided, while buying gradually swelled, thus increasing prices of securities in general. Although some money came back into stocks, a larger amount has been committed to risky high-yield (junk) bonds, and much bigger chunks were being added to conservative corporate bond funds. Signs of economic stability (but not prosperity) have allowed for regained confidence, hence driving prices back up to more rational levels. Stay the course In a world of low interest rates, weak economic activity, with substantial amounts of cash on the sidelines earning almost 0% interest, many bonds still represent good opportunities. Caution should be exercised at seemingly attractive structured products or alternative investments offered by bankers and brokers. Stocks look good for longer term appreciation. Keep it simple. Thank you for your confidence. Sincerely, Karim Armand * The New York Times has a captivating interactive graphic showing the evolution of the market capitalization of the biggest U.S. financial firms over the last two years (go to and in the Search box enter: Interactive Graphic ).

3 Our company manages Fixed-Income, Balanced and Equity portfolios, but this report refers only to the Equity portion of client assets. Core Equity Composite Portfolio Third Quarter Report September 30, 2009 Apres la pluie, le beau temps (After the rain comes fair weather) Our core equity composite portfolio performance increased 53.70% (net) so far this year, while the S&P 500 index including dividends was up 19.26% (gross). This rebound is being driven by stocks whose underlying businesses were given up for dead. The most striking example is Air Transport Services Group, up 1600% this year. Liberty Capital has quadrupled. Liberty Interactive has tripled. Newfield Exploration, ATP Oil & Gas have more than doubled. We have had losers as well, led by Capital Source -16%, Contango Oil & Gas -14%, followed by Pfizer, UnitedHealth and Xerox down more than 8% each. I caution you that such extraordinary increases are very unlikely to happen again. Changes made during the 3 rd Quarter New positions established: Eliminations: Yahoo! none Increases in existing positions: None Reductions: Air Transport Services Group Canadian Natural Resources Liberty Interactive Year-to-date 2009 (9 months) Top contributors to performance Air Transport Services Group (reduced) Liberty Capital (reduced) Liberty Interactive (reduced) WellCare Health Plans (increased) RHJ International Top detractors from performance Tyco Electronics (eliminated) Contango Oil & Gas H&R Block (eliminated) UnitedHealth Group Osterreichische Post (Austrian Post) (eliminated) (please turn to next page)

4 Why buy Yahoo now? An exciting high flying company during the internet bubble of , Yahoo reached $125 per share, carrying a Price-to-Earnings (PE) ratio of 786. Yes, it was selling for 786 times its profits. Yahoo! Yahoo has been waging a bruising battle with deep-pocketed Google and Microsoft for market share in the internet search business. Yahoo recently decided to farm out their search engine to Microsoft who will take on hundreds of employees now working for Yahoo, while freeing management to concentrate on areas where Yahoo is the leader. In addition to eliminating this distracting expense, Yahoo will also receive over 80% of the advertising revenues from the spun-off search business. Low-cost, high revenue equals high cash flows. What is left is a very attractive (and profitable) internet advertising business, currently weighed down by the recession. In addition Yahoo owns almost 40% of one of the top Chinese internet companies: Alibaba Group (Alibaba, Taobao). Yahoo has zero debt and almost 15% of its market capitalization in cash. Adjusting for the value of the Asian businesses, and the cash on its balance sheet, Yahoo (at $17 per share) now sells at a reasonable price relative to its currently depressed cash flow. Over the next year or two I expect to see progress in the lower cost, more focused Yahoo operations to show up in increased cash flows. The economy should be improving, benefitting the advertising business. And finally, Alibaba Group s forecasted growth provides diversification away from the U.S. dollar, combined with a source of wealth creation in Asia.

5 DISCLAIMERS AND OTHER LEGAL INFORMATION This letter ("Letter"), and any information and research contained herein, do not represent recommendations of investment advice to buy or sell securities or any financial instrument nor are they intended as an endorsement of any security or investment. This Letter is for informational purposes only and any information contained in this Letter represents the writer s or provider's own investment opinions, and should not be construed as personalized investment or tax advice. Nothing herein is an offer of any service that is not legal for offer into any particular jurisdiction with Colbert Investment Management Co. (together with all principals, affiliates, employees, and associated persons thereof collectively being referred to herein as "CIM") current licensure (if any). LEGAL AND OTHER INFORMATION. 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Investments in securities are speculative and involve a high degree of risk; you should be aware that you could lose all or a substantial amount of your investment if you attempt to apply any of the information in this Letter. The information contained herein is confidential and may not be reproduced or circulated in whole or in part. *DISCLAIMERS AND INFORMATION RELATED TO ALL PERFORMANCE DATA. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS AND FUTURE ACCURACY AND PROFITABLE RESULTS CANNOT BE GUARANTEED. PERFORMANCE FIGURES ARE PRE-TAX AVERAGES OF INDIVIDUAL YEAR'S RESULTS. ALL PERFORMANCE IS NOT NECESSARILY BASED ON THE SAME TYPES OF GAINS. THE AMOUNTS MANAGED MAY DIVERGE FROM THE AMOUNTS UNDER MANAGEMENT THAT FORMED THE BASIS FOR HISTORICAL PERFORMANCE. ALL PERFORMANCE ASSUMES THE REINVESTMENT OF EARNINGS. THE U.S. DOLLAR IS THE CURRENCY USED TO EXPRESS PERFORMANCE. ACTUAL INVESTMENT ADVISORY FEES INCURRED BY CLIENTS MAY VARY. 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ANY PERFORMANCE REFERENCED IN THIS LETTER IS NOT NECESSARILY BASED ON THE SAME TYPES OF SECURITIES CONTAINED IN ANY INDEX SHOWN OR REFERENCED IN THIS LETTER, NOR IS ANY SUCH INDEX REPRESENTATIVE OF ANY PERFORMANCE PRESENTED IN THIS LETTER. HEDGE FUNDS MAY USE SHORT POSITIONS, DERIVATIVES, AND LEVERAGE, UNLIKE SOME OF THE COMPONENTS OF SOME OF THE INDICES. ANY INDICES SHOWN IN THIS LETTER ARE ONLY TO REFLECT COMPARATIVE PERFORMANCE OF FAMILIAR OR OTHER INVESTMENT STYLES. NO REPRESENTATION IS BEING MADE THAT ANY STOCKS, PORTFOLIO, INDICES, FINANCIAL INSTRUMENT, INVESTMENT OR FUND (INCLUDING THE FUND) WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN OR DESCRIBED IN THIS LETTER. ACTUAL PERFORMANCE WILL VARY BASED ON MANY FACTORS, INCLUDING, BUT NOT LIMITED TO, INVESTMENT STRATEGIES, TAXES, MARKET CONDITIONS, AND APPLICABLE ADVISORY AND OTHER FEES AND EXPENSES. **PERFORMANCE INFORMATION AND DISCLAIMERS RELATED TO THE CIM CORE EQUITY COMPOSITE. 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