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Fixed income markets in the first quarter of 2013 were virtually unchanged from recent prior quarters in terms of yield, demand and issuance. Current interest rates remain near historic lows in nearly every bond market segment. Because of this, the total return of taxable bonds is likely to remain low relative to historical performance. High yield bonds and emerging market debt strongly outperformed broad market bond indices in the first quarter. Municipal bonds continue to offer strong relative value to taxable debt along the yield curve, however, strong demand and low issuance has compressed yields in the past several quarters.

We continue to invest client portfolios in a wide range of asset and sub-asset classes to achieve returns in a manner which strongly controls overall portfolio volatility. On the equity side, we have been rebalancing international and emerging market stock positions upwards to their target weights. The rebalancing discipline is designed to take advantage of the relative value offered in international stocks and will capture gains realized in the U.S. equity markets.

Over the past several quarters, we have added several components to our bond portfolios in an attempt to further diversify the risks of concentration in U.S. government and agency bonds. We have increased our corporate bond exposure and added Treasury Inflation Protected Securities (TIPS), international bonds, and high yield bonds. We continue to look for other avenues for further diversification, including the potential for increasing relative exposure to alternative assets.

In April, Indiana Trust & Investment Management Company welcomed three new members to our board of directors: George S. Cressy, Jr., D. Dwight Gipson, and Jud Fisher.

A resident of Mishawaka, George S. Cressy currently serves as CEO of Grubb & Ellis / Cressy & Everett, a full-service commercial real estate, development and management company serving northern Indiana and southwestern Michigan for more than half a century; he also serves as president of Cressy Land Planning Associates. A graduate of Notre Dame with an MBA from the Northwestern University Kellogg Graduate School of Management, Cressy was recently named one of the region’s best leaders by Northwest Indiana Business Quarterly. In addition to his business interests, Cressy is deeply invested in his community: he is a current board member of the Women’s Care Center, the Laidig Foundation, and the Community Foundation of St. Joseph County, of which he is also a past chairman.

D. Dwight Gipson, of Elkhart, is a retired CPA and tax partner with Crowe Horwath, LLP, where he worked extensively with closely held businesses and their owners. Like Cressy, Gipson has also faithfully served the Michiana community through various leadership roles in organizations including the Elkhart County United Way, Elkhart Riverwalk Association, Inc., Elkhart County Estate Planning Council and Reason Enough to Act (RETA), a pregnancy and family resource center in Elkhart County. Dwight is a graduate of Indiana University with a B.S. degree in accounting.

A prominent and longstanding member of the Muncie business and nonprofit communities, Jud Fisher is president and COO of the Ball Brothers Foundation, a role he’s held since 2003. He also serves as executive director of the Edmund F. and Virginia B. Ball Foundation. Prior to that, he worked for several years in a leadership role at Old National Trust Company. Fisher’s philanthropic and civic service extends beyond the Ball Brothers and Edmund F. and Virginia B. Ball foundations; he is also actively involved with the Red-Tail Conservancy in Muncie, the Methodist Health Foundation and the IU Health Ball Memorial Hospital Foundation. He earned his bachelor’s degree from DePauw University and his master’s degree from Indiana University.

We are proud to be joined by these business leaders and look forward to the role their considerable experience will play in the future of our business. Their individual reputations for excellence in leadership and community service, as well as keen business perception, make them valuable additions to the Indiana Trust board.