2Q12 Wisco Client Letter | Stock Market Index | Real Estate Investment Trust

Dear Clients & Friends;

July 12, 2012

As we close out the second quarter of 2012, we wanted to thank each and every one of you for providing us with the opportunity to work with you as your investment adviser. Because of you, we have been able to make progress in expanding our investment advisory business over the past fifteen months. Our vision has become a reality and we are very excited about the future. We truly value our relationship with you and want you to know that we are always a phone call away. As many of you are already aware, our policy is to rebalance of our model portfolios on a semi-annual basis. We do this in order to realign the positioning of our portfolios with our current market expectations. As we recently completed our mid-year adjustments, we plan to be in touch with you over the next few weeks to discuss rebalancing your portfolio. Although most of these changes may seem small in nature, they do help us to keep your portfolio aligned with your specified risk tolerance objective. In addition, we are planning to host a few investment seminars in the Madison area in the coming months and invite you to attend if you can. Invites are forthcoming. We believe these seminars offer a great opportunity for us to introduce our investment process and philosophies to prospective clients and reinforce them with existing clients. As always, if you know of anyone who might benefit from attending one of our investment seminars, please feel free to invite them as your guest. We are always appreciative of your referrals! Lastly, we have included our second quarter 2012 market review newsletter with this mailing. We hope it offers some insight into our current portfolio positioning. As always, please feel free to contact us anytime to discuss your portfolio’s performance and targeted risk level, as well as any other potential life changes that may be pertinent to how your portfolio is invested. Sincerely,

The Wisco Team

Office: 608.442.5507 Fax: 608.237.2206

437 S. Yellowstone Drive, Suite 101 Madison, WI 53719

Wisco Investment Management
The Wisco model portfolios are constructed using six different asset classes; Domestic Equity, International Equity, Domestic Fixed Income, Commodities, Domestic Real Estate and Money Market. As of June 30, 2012, our model portfolio asset class allocations are as follows:
Wisco Model Portfolios
as of June 30, 2012

Conservative 32% 0% 58% 0% 0% 10% 100%

Balanced 38% 12% 45% 0% 0% 5% 100%

Balanced Growth 45% 15% 35% 0% 0% 5% 100%

Growth 53% 20% 25% 0% 0% 2% 100%

Aggressive 59% 28% 5% 6% 0% 2% 100% 16%

Domestic Equity International Equity Domestic Fixed Income Commodities Domestic Real Estate Money Market Total

Target Volatility1 8% 10% 12% 14% 1 Target Volatility is our estimate for the annual standard deviation of portfolio returns. Source: Wisco Investment Management LLC

Second Quarter 2012 Market Review
Domestic Equity
Domestic Equity Returns
20% 15% 10% 5% 0% -5% -10% -15% -20% -11% -16% 6% 12% 11% 6% 0% -3% 12% 12%

enthusiasm for an improving economy was tempered by a softening in GDP growth from 3.0% in 4Q11 to 1.9% in 1Q12. In addition, the employment gains for the months of April, May and June were just 68,000, 77,000 and 80,000 respectively, versus an average monthly gain of 226,000 in 1Q12. At Wisco, we continue to have a positive view on U.S. equities. Our positive stance reflects our belief in a slow, but improving economic environment, combined with an attractively valued market at the moment. The S&P 500 trades at just 13.1x 2012 earnings, which is below the average PE of the last 20 years. Over the long term, we feel investors will be rewarded for buying equities when they are “cheap” and a low PE ratio is an indication to us that equities are now priced attractively.
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Source: Dow Jones U.S. Broad Stock Market Index and Wisco.

After posting strong returns in the last two quarters, the United States stock market retreated in the 2Q12. Strong corporate earnings along with signs of an improving economy were a tailwind for stocks in the first quarter. However, in 2Q12, some of the

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For the last 13 years, U.S. equities have been more or less flat, producing no return and frustrating investors. While this disappointing “lost decade” has caused many investors to become dissatisfied with the stock market, we feel it can be viewed as an opportunity. Long periods of underperformance and high levels of negative investor sentiment are often a prelude to better equity returns. International Equity
International Equity Returns
28% 21% 14% 7% 0% -7% -14% -21% -28% -7% 2% 17% 8% 3% 1% 7% 11%

we continue to have exposure to these markets in all but our most conservative models. Domestic Fixed Income
Domestic Fixed Income Returns
5% 4% 3% 2% 1% 0% -1% -2% -3% -1% 0% 2% 0% 3% 2% 2% 1% 4% 2%

Source: Barclays Capital U.S. Aggregate Bond Index and Wisco.

-16% -24%
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Source: MSCI ACWI ex USA and Wisco.

Like the domestic equity market, the international equity market reversed course in the 2Q12 after posting strong results in the last two quarters. The European debt crisis continues to be a negative overhang on the continent’s growth. China also shows signs of slowing posting a lower than expected GDP of just 7.7% in the first five months of 2012 and cutting interest rates for the first time since 2008. On the bright side, natural resource rich nation’s such as Canada and Australia are showing strong economic growth. We are concerned about the crisis in Europe and feel it could become a drag to the global economy. Therefore, we are reducing the exposure to international equities in all our model portfolios. That said, Wisco continues to believe international equities are an important part of a diversified portfolio and
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Domestic Fixed Income continued to produce steady returns in the 2Q12 just as it has for the last two years. Despite long-term concerns that high deficit spending will ultimately lead to higher interest rates and hence lower fixed income returns, to date those concerns have been trumped by the U.S. dollar’s status as a global safe haven which continues to attract capital in the face of Europe’s currency crisis. In addition, inflation concerns have yet to be realized as poor employment gains appear to be holding back any pent up inflation. While U.S. Treasury yields reached an all-time low in the quarter at 1.5% on 10-year notes, Wisco feels yields could continue to stay at these low levels in the near-term given uncertainty in Europe and the tepid domestic economic recovery. Therefore, we have fixed income securities in all our portfolios with an emphasis on U.S. Aggregate and TIPS (Treasury Inflation-Protected Securities) in the more conservative portfolios and Corporate Bonds in the more aggressive portfolios.

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Commodities
Commodities
20% 15% 10% 5% 0% -5% -10% -15% -20% -5% -5% -8% -11% -5% 4% 2% 0% 12%

16%

approximately 30% in the last nine months, Wisco feels Real Estate may be due for a breather, therefore; we are taking it out of all of our model portfolios. Money Market Wisco is now including a modest money market allocation in all of our model portfolios. The current yield of the Schwab Money Market is 0.01%. Low Federal Funds rates have held down short term yields. We think short term rates will remain low for at least the next six months.

Source: Dow Jones-UBS Commodity Index and Wisco.

Commodity prices continued to exhibit a high degree of volatility with the Dow-Jones Commodity Index falling 5% in the quarter. Declines in Crude Oil (down 19%) and Gold (down 4%) overwhelmed a modest 2% gain in Agriculture, resulting in a drop in the commodity index. Wisco feels there is an investment opportunity in commodities but only for investors who are able to accept a high degree of volatility. Therefore, we are only holding commodities in our most aggressive portfolio. Domestic Real Estate
Domestic REIT's
20% 15% 10% 5% 0% -5% -10% -15% -20% -15% -4% 13% 10% 7% 7% 4% 15% 10% 4%

Source: Dow Jones U.S. Select REIT Index and Wisco.

Real Estate, as measured by the Dow Jones U.S. Select REIT Index, continued to move higher in the 2Q12, after posting two strong quarters in 4Q11 and 1Q12. After increasing
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Disclaimer: Wisco Investment Management LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities product, service, or investment strategy. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser, tax professional, or attorney before implementing any strategy or recommendation discussed herein.

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