1 1 Peter C. Karp Karp Capital Management October 24, 2012 SIR's Area 2 $ums Investment Group “Turning on a Dime”

2 Agenda  Global growth is slowing  European debt problems  Are we experiencing inflation or deflation?  Strong Dollar  The fear of the future problem of the U.S. Treasury debt  Karp Capital Management – Who we are  Summary

3 Budget Deficit Property Tax Declines Vallejo, CA Credit Risk Chapter 9 Ratings Migration Dodd-Frank Act Liquidity Pension Reform Deficit Financing OPEB Reform Tax Reform Low Rate Environment Jefferson County, AL Market Complexity Harrisburg, PA Stockton, CA Downgrades Tax Reform Volcker Rule State Aid Cuts Falling Revenues Fiscal Cliff Issuer Transparency Higher Volatility Political Stalemate Meredith Whitney Disappearance of AAA Insurance ….Cast Clouds Over The Market Negative Headlines…

4 Major Drivers In Washington, DC Fiscal Cliff Regulatory Agendas 2012 Elections

5 Most Likely Scenario Majorities in the House and Senate will be very small regardless of who wins control in each chamber

6 Could cause a 20% to 30% decline in corporate profits Sources: Congressional Budget Office/Fidelity and other economists. What Is The Fiscal Cliff? Could result in a 3%-5% drag on GDP Could drive unemployment up to 9 percent But, continuing on current path, could result in debt reaching 90% of GDP by 2022… Scheduled tax hikes and spending cuts = up to $606 billion Bush-era tax cut expiration $221 billion Other changes $116b Payroll tax relief & extended unemployment insurance $121b Budget sequester $65b Tax extenders $65b Healthcare reform taxes $18b

7 * Includes 3.8% tax on unearned income from the federal healthcare law and reinstatement of the personal exemption and itemized deduction phase outs. Potential Tax Rate Impact

8 What To Expect In The Next Few Months OctoberNovemberDecemberJanuaryFebruary Fiscal year 2013 begins Election day Holidays “Lame Duck” session of Congress “Fiscal cliff” Debt ceiling reached New Administration & Congress President proposes FY 2014 budget Thanksgiving

9 Mutual Funds and ETFs Since December 2007, investors have favored fixed–income securities, plowing over 1.1 trillion of net flows into bond mutual funds and ETFs while equity funds have only received around $33 billion..

10 Current valuations… …suggest decent return expectations.

11 Today’s Flows May Offer… …Only Low Yields and Low Diversification

12 Consider What Can Happen When You… …Introduce Non-Traditional Asset Classes

13 Karp Capital Management  Ranked one of the top 25 Wealth Advisors in the Bay Area  Over $170MM in Assets Under Management  Access to top Financial Institutions & Service Providers  Portfolios Designed & Managed In-house for Individuals, Qualified & Non-Qualified Retirement Plans  Single Point of Contact to Manage your Investments  Unbiased Advice, No Hidden Agendas or Competing Objectives  Local Personalized Service and Customized Solutions  Total Fee Transparency – Documented by ADV Form, requirement of SEC

14 Contact Peter C. Karp Karp Capital Management San Francisco, CA Tel: (415) KARP karpcapital.com Although information in this document has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness, and it should not be relied upon as such. All opinions and estimates herein, including forecast returns, reflect our judgment on the date of this report and are subject to change without notice. Such options and estimates, including forecast returns, involve a number of assumptions that may not prove valid. Further, investments in international markets can be affected by a host of factors, including political or social conditions, diplomatic relations, limitations or removal of funds or assets, or imposition of (or change in) exchange control or tax regulation in such markets. The past performance of securities or other investments does not necessarily indicate or predict future performance, and the value of investments and income arising there from can fall as well as rise; the investor may get back less than what was invested; and no assurance can be given that any portfolio or investment described herein would yield favorable investment results. We or our associated persons may act upon or use material in this report prior to publication. This document may not be reproduced or circulated without our written authority.