Indiana Trust Company

Formulating an Investment Strategy

Stating Objectives
We believe the first step in developing a successful portfolio is to clearly define its purpose. Through individual client meetings, the officers of Indiana Trust Company outline and clarify each investor's needs and objectives, both in human terms and investment terms. Following an analysis of the client's tolerance for risk, or willingness to accept market volatility, limits are set regarding the risk the client is willing to take in order to meet the objectives. Then, based on a state-of-the-art capital asset allocation model, a plan is formulated to spread investments among stocks, bonds, and other asset classes to provide the highest potential return for the client's given level of risk.

Modern Portfolio Theory
Portfolios developed at Indiana Trust Company are based on Modern Portfolio Theory. This remarkable concept examines the relationship between risk and reward over time. Modern Portfolio Theory was introduced by Harry Markowitz, who in 1990 won the Nobel Prize for Economics for his work on the subject. The central tenet of Modern Portfolio Theory holds that by controlling risk through diversification of assets, an investor will realize superior returns over a long period of time, as compared to the investor who routinely accepts high risk, over-exposing his portfolio to the short-term fluctuations of the market. In short, a portfolio consisting of broadly diversified assets (i.e., bonds, large- and small-cap domestic stocks, international securities, real estate, etc.) can be expected, in the long run, to out-perform a portfolio consisting entirely of stocks, despite their apparent high risk/reward ratio. Conversely, adding small percentages of higher risk securities such as stocks to a fixed income portfolio can be seen to reduce risk over time, as well as potentially enhance return. Modern Portfolio Theory provides the mathematical framework to guide each investor to the proper portfolio mix, given his personal investment objectives.

Diversification by Asset, Style and Fund
Each client's investment strategy is implemented using a unique multi-style, multi-manager diversification technique designed to control risk, raise returns, and ensure the client's goals are met well into the future. Clients invest primarily in a series of private, no-load special purpose investment funds, which serve as the core components of diversified portfolios. These investment funds are strategically designed and the money managers of the funds are chosen by the Russell Investment Company, one of the world's largest and most respected investment consulting firms. By utilizing Russell-sponsored funds as investment vehicles, Indiana Trust Company clients are able to command the services of the world's top money management firms, and benefit from the sophisticated multi-style, multi-manager technique.

Continuous Evaluation
Managing an investment portfolio is a continuing process which requires on-going monitoring of progress and results, re-evaluation of strategies, and reassessment of objectives. Accordingly, the principals of Indiana Trust Company devote the time and attention required to achieve superior risk/return investment results within a defined framework.