1. Financials David Kaplan, Nikhil Ketkar, Jonathan Khoury, Steve Kuljko

2. Agenda Sector Analysis Economic Analysis Financial Analysis Valuation Recommendations

3. SIM v. S&P 500 Weightings SectorS&P 500 WeightSIM Weight +/- Consumer Discretionary10.11%9.53%-0.58% Consumer Staples11.2611.770.51 Energy10.8810.10-0.78 Financials16.5011.93-4.57 Health Care12.1515.273.11 Industrials10.5013.032.53 Information Technology18.8719.871.00 Materials3.481.80-1.67 Telecommunications2.813.620.82 Utilities3.441.88-1.57

4. Returns by sector (as of 3/31/2010)

5. Comparison of Returns - as of April 26, 2010 Time periodS&P 500Financial Sector 2 weeks-0.31%-2.62% 1 month2.060.77 3 months8.4910.72 6 months11.9711.17

6. Sector Composition Key Industries  Life Insurance – 2,199B  Money Center Banks – 1,014B  Foreign Money Center Banks – 753B  Closed-End Fund Equity – 586B  Prop & Casualty Ins – 440B  Foreign Regional Banks – 284B SIM Holdings  Goldman Sachs Group (GS) 4.97%  Hudson City Bancorp (HCBK) 2.50%  JP Morgan Chase (JPM) 1.74%  Progressive Corp (PGR) 2.73% Market Cap – 6.8 T

7. Sector Analysis The sector is extremely cyclical Sector beta: 1.7 In the mature phase of the life cycle External drivers: – Financial Regulation – Interest Rates – Housing starts

8. Industry Analysis Product SegmentationEase of Entry Industry Breakdown Percent 1. Diversified Financial Services28.30% 2. Insurance22.70% 3. Commercial Banks19.80% 4. Capital Markets16.40% 5. Real Estate Investment Trusts (REITs)7.50% 6. Consumer Finance4.70% 7. Thrifts & Mortgage Finance0.40% 8. Real Estate Management & Development0.20% Not an easy industry to enter Large companies with years of experience Learning curve Intellectual property; e.g. Financial Models, Research Documents etc

9. Economic Analysis 2-Year Treasury vs. Financials 10 Year Treasury Yield Vs. Financials R=.67 R=.54

10. Economic Analysis Employment Consumer Spending R=.82 R=.73

11. Competition Economic Analysis- Multiple regression High level of interdependence – Swaps, Derivatives, Futures – Repurchase, Reverse Repurchase – E.g.- Lehman Brothers collapse R=.83

12. Financial Analysis Net Income Vs. S&P 500ROE Vs. S&P 500

13. Key Indicators Revenues – 30% from the high in ‘07 – Negative in terms of growth for the past 5 years – 50% increase over the past 10 years EPS growth – Large amount of volatility – Increased exponentially in 2009-2010 – Expected reversion to mean by 2011 Net profit margins: – Winners: Foreign closed end funds, diversified investments, healthcare and industrial REITS – Losers: Investment brokerage, banks, hotel REITS Net profit margins decreasing since 1994, now at par with the S&P ROE had been at par with the S&P now trading at discount Margins are increasing

14. Net Income Chart- by Industry

15. Largest Companies by market Capitalization

16. Financial Sector Valuation Price to Book lower than 22 yr median P/S and P/ Trailing E currently near record lows Price to Forward E remains elevated

17. Technical Analysis: Historical Data Levels of support and resistance evident Sharp uptick in valuation compared to Bollinger Bands Trading above 50/200 day averages

18. Variation Across Industries

19. Variation Across Companies Charles Schwab (SCHW) Morgan Stanley (MS) Goldman Sachs (GS)

20. Recommendations We are overweight in Financials, sell Financials and invest in something more reliable Technical Analysis suggests we are overvalued What happens when interest rates increase? Political Reform will affect the financial sector negatively, so let’s be prepared