Sellinger Applied Portfolio Report Spring 2013 Background Economic

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Sellinger Applied Portfolio Report Spring 2013

Sellinger Applied Portfolio Report Spring 2013

Background & Economic Conditions

Background & Economic Conditions

U. S. Economy Source: St. Louis Federal Reserve

U. S. Economy Source: St. Louis Federal Reserve

U. S. Economic Outlook § § § Federal Reserve trimmed its 2013 and 2014

U. S. Economic Outlook § § § Federal Reserve trimmed its 2013 and 2014 economic growth forecasts for the U. S. economy. New revised growth rate is 2. 3 -2. 8 percent for 2013 and 2. 9 -3. 4 per cent in 2014. The fed will hold its ultra-low benchmark interest rate of 0 -0. 25 per cent and its quantitative easing program of $85 billion a month in bond purchases aimed at holding down long-term interest rates. The unemployment rate is expected to drop to between 7. 3% and 7. 5% for 2013. That’s down from a previous range of 7. 4 percent to 7. 7 percent. Consumer Confidence in the United States increased to 69. 60 in February of 2013 from 58. 40 in January of 2013. Largely due to the falling unemployment rate. Inflation is projected to be 2. 5 percent between one and two years ahead. Source: Thomson Reuters, Bloomberg

U. S. Trade Deficit § U. S. Census Bureau Announcement March 7 th §

U. S. Trade Deficit § U. S. Census Bureau Announcement March 7 th § Total January exports of $184. 5 B and imports of $228. 9 B § § Goods and Services deficit of $44. 4 B (up from $38. 1 B in December) Deficit decreased $7. 8 B from Jan 2012 to Jan 2013 § Source: : U. S. Census Exports were up 3. 3% and imports were down 0. 9%

U. S. Budget Cut § March 1: The "sequester" cuts came into force earlier

U. S. Budget Cut § March 1: The "sequester" cuts came into force earlier this month due to failure to agree on budget. § If left alone, government agencies have to cut a total of $85 billion from their budgets. § Negotiations continue to form a new budget to avoid federal government shutdown at the end of march. § Two parties polarized over whether to balance the budget through a series of tax cuts or a series of tax hikes. § Any spending cuts or tax hikes is likely to impact future GDP growth.

Housing Market Conditions § § Home prices closed out 2012 with solid gains §

Housing Market Conditions § § Home prices closed out 2012 with solid gains § Housing recovery continues to gain momentum § Property values rose 6. 8% from December 2011 (S&P/Case-Shiller Home Price Index) § Builds momentum for another positive year in 2013 Permits for new construction increased to highest level since 2008 in Feb. § Climbed almost 5% over January numbers & are 34% ahead of figures reported this time last year § Outlook for Spring is positive NAR projects about 5 million existing-homes to be sold in 2013 Confidence among homebuilders slipped in March § A limited supply of lots and building materials will slow sales § Forecasts state housing prices will continue to gain strongly regardless

International Economics §January § § § 23 th: IMF Raises Global Growth Forecast The

International Economics §January § § § 23 th: IMF Raises Global Growth Forecast The International Monetary Fund projects global growth to increase during 2013, as the factors underlying soft global activity are expected to subside. In its report, the “World Economic Outlook, ” increased estimated 2013 global growth to 3. 5% from 3. 2% in 2012. The euro area continues to pose a large down side risk to the global outlook. In particular, risks of prolonged stagnation in the euro area as a whole will rise if the momentum for reform is not maintained. If crisis risks do not materialize and financial conditions continue to improve, global growth could be stronger than projected. However, downside risks remain significant, including renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States. Source: Bloomberg, CNN Money

International Economics § March: Cyprus accused of running “Casino Economy” § Assets of the

International Economics § March: Cyprus accused of running “Casino Economy” § Assets of the Cypriot banking sector are 7. 5 times the size of the island's economy, which produces about £ 15 billion a year. § Financial sector is dominated by three large banks, two of which Laiki and the Bank of Cyprus are on the verge of collapse. § Euro leaders agreed to a $13 billion bailout for Cyprus. § The European Union § Pressure on debtor nations to take further austerity measures. § However, debtor nations are already suffering a recession. § North Korea: Embargo on any financial transactions with Pyongyang that could in any way be linked to its nuclear and missile programs. § Stricter embargo on luxury goods and services. Source: Thomson Reuters, Bloomberg

Sector Overviews

Sector Overviews

Consumer Discretionary (XLY) • Consumer Discretionary currently comprises 11. 23% of the S&P 500

Consumer Discretionary (XLY) • Consumer Discretionary currently comprises 11. 23% of the S&P 500 • Sector is dependent upon current market and economic conditions, since it is comprised of nonessential goods and services primarily used for leisure over necessity • Has continued to perform fairly-well despite issues regarding the fiscal cliff, supporting the SAP fund’s overweight contribution consisting of 18. 29% of the portfolio *Sources: Yahoo Finance, Morningstar Direct, Reuters Eikon Stocks to Watch Symbol Michael Kors (KORS) Amazon (AMZN)

Consumer Staples (XLP) • Consumer Staples currently makes up 10. 92% of the S&P

Consumer Staples (XLP) • Consumer Staples currently makes up 10. 92% of the S&P 500 • Due to the basic human necessity for consumer staples, our portfolio strategy is to be overweight in this sector because consumers will purchase food, beverages, products for the home and prescription drugs regardless of poor economic conditions. • This Index has historically appreciated over time. During 2009, the Index retraced approximately 30 percent in 2009, however it rebounded back above its pre-recession levels in 2012. Compared to the financial sectors and other sectors, the sector (following the index) has been similarly volatile and high-performing. Stocks to Watch *Sources: Yahoo Finance, Morningstar Direct, Reuters Eikon Symbol Conagra Foods, Inc. (CAG) CVS Caremark Corporation (CVS)

Energy Sector (XLE) • Energy currently comprises 11. 13% of the S&P 500 and

Energy Sector (XLE) • Energy currently comprises 11. 13% of the S&P 500 and has been underperforming the S&P 500 • Underweight portfolio contribution as a result of the sector’s volatility • Leading factors for lagging energy market: Euro Zone Crisis Fiscal Cliff Negotiations Environmental Effects Stocks to Watch *Sources: Yahoo Finance, Morningstar Direct, Reuters Eikon Symbol Enterprise Products Partners, L. P. (EPD) Halliburton (HAL)

Financial Sector (XLF) • Financials currently make up 15. 14% of the S&P 500

Financial Sector (XLF) • Financials currently make up 15. 14% of the S&P 500 • Typically it is better to keep this sector underweight due to its riskiness during uncertain economic conditions • Historically, following the S&P Financial Sector Index, the financial industry has been relatively volatile, with a considerably more volatile track record of performance than the S&P 500 Index • Analysts predict slow growth for the fiscal year 2013 Estimates show a projected annual growth of 9. 96% Industry average PEG ratio reducing to 1. 12, from a current 1. 17 Stocks to Watch Black. Rock, Inc. *Sources: Yahoo Finance, Morningstar Direct Symbol (BLK)

Healthcare Sector (XLV) • Health Care Sector currently comprises 12. 26% of the S&P

Healthcare Sector (XLV) • Health Care Sector currently comprises 12. 26% of the S&P 500 • Currently outperforms the S&P 500 • The Healthcare Sector is comprised of stocks related to the medical and healthcare goods or services. These include pharmaceuticals, health care services/providers, health care equipment, and biotechnology. • Health Care sector stocks are considered defensive due to consistent demand despite economic troubles. Stocks to Watch Symbol Cigna Corporation (CI) Johnson and Johnson *Sources: Yahoo Finance, Reuters Eikon (JHJ)

Industrials Sector (XLI) • Currently comprises 10. 14% of the S&P 500 and performs

Industrials Sector (XLI) • Currently comprises 10. 14% of the S&P 500 and performs similarly • The Industrials Sector includes companies whose businesses are dominated by production or provision of products for other industries. • Industries in this sector include aerospace and defense, building products, construction and engineering, electrical equipment, conglomerates, machinery, commercial services and supplies, air freight and logistics, airlines, marine, road and rail, and transportation infrastructure companies. • The Industrials Sector is driven by supply and demand for construction and manufactured products. • Experiences a downturn in a weak economy due to low demand for expansion/construction/production etc. Stocks to Watch *Sources: Yahoo Finance, Morningstar Direct, Reuters Eikon Symbol U. S. Airways Group, Inc. (LLC) Toyota Motor Corporation (TM)

Information Technology (XLK) • Currently comprises 19. 07% of the S&P 500 and severely

Information Technology (XLK) • Currently comprises 19. 07% of the S&P 500 and severely underperforms the S&P 500 at 7. 87% • The technology sector includes companies of the following types: internet software and service, IT consulting, semiconductor equipment and products, computers, etc. • Sub-sectors: Technology Hardware & Equipment, Software & Service and Semiconductors & Semiconductor Equipment • Information Technology Sector is historically very volatile although people are becoming more understanding of the role of IT in today’s world *Sources: Yahoo Finance, Reuters Eikon Stocks to Watch Symbol Microsoft, Inc. (MSFT)

Materials Sector (XLB) • Materials sector currently makes up 3. 52% of the S&P

Materials Sector (XLB) • Materials sector currently makes up 3. 52% of the S&P 500 and is underperforming the S&P 500 • Consists of a range of manufacturing companies involved in industries such as: chemicals, metals and mining, paper and forest products, construction materials, etc. • The materials sector performs well in a strong and expansive economy because it is heavily involved with construction and supply of raw materials Stocks to Watch Praxair, Inc. FMC Corporation *Sources: Yahoo Finance, Morningstar Direct Symbol (PX) (FMC)

Telecommunications Sector (XTL) • Telecommunications currently comprises 3. 16% of the S&P 500 •

Telecommunications Sector (XTL) • Telecommunications currently comprises 3. 16% of the S&P 500 • The main industries in this sector are diversified telecommunication services and wireless telecommunication services which operate on a global scale and are strung together by complex networks • Companies that integrate multiple services, notably wireless communications and data transmission, dominate the telecomm sector • Constantly changing and adapting industry in relation to technological innovation • Performs fair during economic downturn because of its modern day necessity Stocks to Watch Bell Canada Enterprises, Inc. AT&T, Inc. *Sources: Yahoo Finance, Reuters Eikon Symbol (BCE) (T)

Utilities Sector (XLU) • Utilities currently makes up 3. 45% of the S&P 500

Utilities Sector (XLU) • Utilities currently makes up 3. 45% of the S&P 500 and underperforms the S&P 500 • The Utilities Sector is comprised of companies that provide public services, primarily the generation and distribution of electricity. The utilities sector contains 83 companies and is broken into the following categories: Diversified Utilities, Electric Utilities, Foreign Utilities, Gas Utilities, and Water Utilities • Movement within this sector has been volatile recently but, appears to be taking an upswing in early 2013 Stocks to Watch *Sources: Yahoo Finance, Reuters Eikon Symbol Duke Energy Corporation (LLC) Southern Corporation (TM)

Growth Strategy Analysis

Growth Strategy Analysis

Growth Strategy Buy Criteria § Conservative Mentality – Expect to perform better than industry

Growth Strategy Buy Criteria § Conservative Mentality – Expect to perform better than industry § Revenue growth ≈> industry average and forecasted to continue § Strong Earnings ~ 5 years of CAGR § ROE ≈ ≥ 15% and > Industry Average. § PEG ≈ ≤ 1. 2 and < Industry Average § Debt / Equity < 1. 5 (or Acceptable Interest Coverage Ratio when D/E >1. 0) Stop Loss Criteria § Establish at 80% of Purchase Price § Evaluate as information and stock price changes. § If stock appreciates – move stop loss up accordingly (consider trailing / crawling stop) § If company business fundamentals deteriorate – raise stop loss or sell per sell criteria. § Earnings miss, lower guidance, slowing revenue growth etc. Sell Criteria § Re-evaluate positions when: § The price reaches 10% below target price § The price is 20% above purchase price. § Evaluate Sell under following: § Company loses its leadership position § Company business fundamentals deteriorate. § Slowing unit volume, revenue decline, etc. § Superior investment alternatives are identified.

Company Ticker Symbol 5 -Year CAGR ROE ≥ 15% PEG ≤ 1. 2 Debt/Equity

Company Ticker Symbol 5 -Year CAGR ROE ≥ 15% PEG ≤ 1. 2 Debt/Equity < 1. 5 Unitedhealth Group, Inc. UNH 13. 6 18. 5 1. 06 0. 43 Celegene Corporation CELG 16. 66 26 0. 7 0. 2 Starbuck's Corporation SBUX 8. 5 28. 5 1. 3 0. 1 Halliburton HAL 10. 8 22. 6 0. 7 0. 3 Blackrock Inc. BLK 1. 12 9. 27 0. 9 0. 25 Target TGT 1. 97 18. 7 1. 2 1. 11 Conagra CAG 4. 8 4. 6 1. 55 0. 79 Jos. A. Bank JOSB 12. 4 18. 3 1. 06 0. 02 Francescas Holdings Corporation FRAN n/a 127. 46 0. 77 0 Sherwin Williams Co. SHAW 2. 3 37 1. 1 0. 47 United Technologies Corporation UTX 0. 71 20. 6 1. 14 0. 9 CI 4. 33 18 0. 95 0. 5 CVS Caremark Corporation CVS 17. 5 10. 2 0. 8 0. 24 Johnson Controls Inc JCI 3. 9 10. 9 1. 04 0. 5 NU Skin Enterprises CL A NUS 9. 3 38. 87 0. 84 0. 38 Gilead Sciences Inc. GILD 22. 6 33. 89 0. 8 Michael Kors Holdings F KORS 43. 94 52. 3 1. 02 0. 81 Cigna Corporation

CVS § CVS Caremark Corporation is one of the largest retail pharmacy chains in

CVS § CVS Caremark Corporation is one of the largest retail pharmacy chains in the U. S. with one of the largest pharmacy benefit managers. They provides pharmacy benefit management (PBM), mail order and specialty pharmacy division (Caremark Services), health clinic subsidiary (Minute. Clinic), and online retail pharmacy (CVS. com) SAP CVS Caremark Requirements Corp Greater than Industry Revenue Growth Average (5. 7%) 17. 5% >15% and >Industry ROE Average (11%) 10. 2% <1. 2 and Industry PEG Ratio Average (1. 4). 8 Debt/Equity BETA <1. 5 0. 24 1. 01 Earnings rating improved significantly over the past two weeks from 8 to 10. On 2/06/13, the company announced quarterly earnings of 1. 14 per share, a positive surprise of 3. 5% above the consensus 1. 10. CVS’s current quarter consensus estimate has increased over the past 90 days from 0. 74 to 0. 79, a rise of 7. 6%. Drug retailers industry have moved 4. 0% during the same period

Johnson Controls is global diversified company in the building and automotive industries. They deliver

Johnson Controls is global diversified company in the building and automotive industries. They deliver products services and solutions that increase energy efficiency and lower operating costs in buildings. • JCI has 15, 000 HVAC service providers, which makes it 3 x sizes of its next competitor • Government’s push for “green initiatives” will keep JCI profitable, especially in emerging markets • JCI is the leader in start-stop battery technology, an industry that is projected to grow to 35 mm units by 2015. Industry is currently at 7 mm • JCI’s strong balance sheet provides financial flexibility to makes investments when needed and better withstand industry turndowns

Sherwin Williams Sherwin-Williams Company develops, manufactures, distributes and sells paint related products to professional,

Sherwin Williams Sherwin-Williams Company develops, manufactures, distributes and sells paint related products to professional, industrial, and retail customers and is headquartered in Cleveland, Ohio • • Sherwin-Williams has a network of company-owned stores which creates tighter customer relationships. This equates to higher returns on capital in comparison to the competitors With a recovery in the domestic construction market in the near future the demand pricing power for Sherwin Williams should increase as they control over 30% of the market sector With the recent acquisition of Comex, Sherwin Williams should see substantial growth opportunities in foreign markets. In 2011, foreign sales only accounted for less than 20% of total revenue. Sherwin Williams is poised to increase its market share over competitors due to innovation, such as the Visualizer and Colorsnap i. Pad App

Nu Skin Enterprises §Direct selling company distributing over 200 anti-aging products §Founded in 1984

Nu Skin Enterprises §Direct selling company distributing over 200 anti-aging products §Founded in 1984 §Operations in 53 international markets §HQ is in Provo, Utah §Industry: Personal Products §Sector: Consumer Goods • Record 4 th quarter earnings • Strong performance & increase in cash flows • Revenues from China increased 28% since prior year-period • Plans to increase dividends in 2013 by 50% • 140% increase over the past 3 years • Worldwide consumers spend $120 B on personal/household products • USA is 25% of the total • Baby Boomer Generation Entering Old Age

Francescas Holdings Corp. § § § Francescas Holdings Corp. operates a chain of boutique

Francescas Holdings Corp. § § § Francescas Holdings Corp. operates a chain of boutique stores in 44 states. Founded in 1999, they sell apparel, jewelry, accessories and gifts, mainly targeted towards female customers. Felt the rise in confidence regarding the economy would help fuel sales for the firm Wanted to purchase the firm before they reported earnings during March of 2013 The opening of 76 new stores in 2012 showed that the company appeared to be doing well financially and focused on growing Bought 266 shares on January 30 SAP Requirements Greater than Industry Average Revenue Growth (12. 96%) >15% and >Industry Average ROE (27. 73%) <1. 2 and Industry PEG Ratio Average (1. 21) Debt/Equity BETA <1. 5 Francescas Holdings 43. 91 127. 46%. 77 0. 0 2. 68 The Reuters estimates for the firm rated it a strong buy. Both the low and mean price targets are above the current stock price, indicating that the stock is trading below what it is worth.

United Technologies Corporation § § § UTX operates under 6 segments: Otis, Carrier, Pratt

United Technologies Corporation § § § UTX operates under 6 segments: Otis, Carrier, Pratt & Whitney, UTC Fire & Security, Sikorsky and Hamilton Sunsdtrand. These 6 areas provide technology products and services to the building systems and aerospace industries worldwide. Some Pratt & Whitney engines had been selected for use in a company’s new planes because of their decreased noise and increased fuel efficiency. Another positive associated with the stock was the constant dividend investors had been receiving. Dividends have been given consistently since 2003, with the most recent being $. 54 SAP Requirements Greater than Industry Revenue Growth Average(7. 7) >15% and >Industry Average ROE (13. 79%) <1. 2 and Industry PEG Ratio Average (-) Debt/Equity BETA <1. 5 United Technologies 1. 1% 20. 6% 1. 14 0. 9 1. 14 Purchased 110 shares on February 1. Wanted to hold stock prior to April earnings release.

Gilead Sciences Inc • § § Gilead Sciences, Inc is a biopharmaceutical company that

Gilead Sciences Inc • § § Gilead Sciences, Inc is a biopharmaceutical company that discovers, develops, and commercializes medicines. They specialize in areas concerning HIV/AIDS, liver diseases (hepatitis B &C) and respiratory diseases. Gilead Sciences, Inc. has collaborations with BMS, GSK, Janssen, and Japan Tobacco to develop and commercialize various products. The company was founded in 1987 and is headquartered in Foster City, California. The Reuters mean price target Purchased 240 shares on February 22 SAP Gilead Sciences Requirements Inc Greater than Industry Average Revenue Growth (16. 3%) 22. 6% >15% and >Industry ROE Average (13. 5%) 33. 89% <1. 2 and Industry PEG Ratio Average. 9 Debt/Equity BETA <1. 5 0. 8. 8 was above the current price and was one factor leading to our decision to purchase the stock. Additionally, the stock had beat predictions throughout the previous year.

Cigna provides health care and related benefits offered to individuals, and through employers, brokers

Cigna provides health care and related benefits offered to individuals, and through employers, brokers and consultants. Key product lines include: §Health care products and services §Group disability, life and accident insurance §International insurance coverage • With a concentration in fee-based ASO business, Cigna is less exposed to fluctuating medical costs and certain SAP Requirements Cigna provisions of health-care reform. Greater than • Cigna could gain expertise from Industry Average Revenue Growth (5. 7%) 4. 8 Health. Spring that will help it improve >15% and >Industry provider and consumer engagement. ROE Average (11%) 18 • Cigna earns relatively high margins on <1. 2 and Industry PEG Ratio Average (1. 4) 0. 95 its faster-growing international business, which offers life, accident, and health Debt/Equity <1. 5 0. 5 insurance outside the United States. BETA 1. 09 • Merger and acquisition activity could increase Cigna's scale advantages or net shareholders a takeover premium.

Michael Kors § § Michael Kors Holdings Limited is a designer, marketer, distributor and

Michael Kors § § Michael Kors Holdings Limited is a designer, marketer, distributor and retailer of women’s apparel/accessories along with men’s apparel KORS operates in the following 3 business segments: § Retail – consists of collection stores, lifestyle stores, including concessions and outlet stores § Operated primarily in United States, Canada, Europe, and Japan § Wholesale – revenues derive from department and specialty stores located in the countries above § Licensing – company licenses its trademarks on various products including: fragrances, eyewear, leather, jewelry, and footwear Revenue Growth ROE PEG Ratio Debt/Equity BETA SAP Requirements Michael Kors Greater than Industry Average (5. 7%) 44% >15% and >Industry Average (11%) 52. 3% <1. 2 and Industry Average (1. 4) 1. 02 <1. 5 . 81 1. 6 • KORS currently has an earnings rating of 10, which is significantly more bullish then the Apparel Retailers Industry of 6. 4 • On 2/12/13, the company announced quarterly earnings of 0. 64 per share, a positive surprise of 55. 7% above the consensus 0. 41. • KORS current quarter consensus estimate has increased over the past 90 days from 0. 32 to 0. 38, a gain of 16%. Industry Average of 1% during the same period.

Black Rock Inc. (BLK) Black. Rock is an independent investment management firm. Clients include

Black Rock Inc. (BLK) Black. Rock is an independent investment management firm. Clients include taxable, tax-exempt and official institutions as well as retail investors and high net worth individuals. Its product range includes single and multi asset class portfolios investing in equities, fixed income, alternatives and money market instruments. Value Strategy Investment Rationale: • Trading for 12. 6 times next year's estimated earnings of $14. 76 a share, the stock could rally to $210 in 12 months as it earns a higher multiple. • Black. Rock earned $2. 3 billion, or $12. 37 a share, last year, on revenue of $9. 1 billion, and this year is on track to earn $13. 18. • Product diversity provides BLK with more stability than many of its peers. Value Criteria BLK Industry P/S < Industry 3. 2 P/BV < Industry 1. 2 2. 9 Dividends > Industry 3. 20% 1. 80% Positive Free Cash Flow Yes • • Purchased 105 shares at $189. 11 Return as of 3/27/2013: 34. 36%, $6, 872. 89 since investment on 10/17/12

Target Corporation (TGT) § Target, founded in 1902, is the second largest discount retailer

Target Corporation (TGT) § Target, founded in 1902, is the second largest discount retailer in the United States. Value Strategy Investment Rationale: • Value Criteria TGT Industry P/S < Industry 0. 6 P/BV < Industry 2. 7 3. 5 Dividends > Industry 2. 0% 1. 9% Positive Free Cash Flow 2, 048, 000 • Target plans to open 100 -150 stores in Canada by 2014 (Canadian expansion began in 2011) Future expectations of Forward PE, Dividend Yield, and 5 -Year Growth outshine that of direct competitors • Trading at 10% discount to Wal-Mart and 35% to Costco • • Purchased 260 shares at $62. 81 Return as of 3/26/2013: 8. 72%, $1, 432. 69 since investment on 10/17/12

Stanley Black & Decker, Inc. § Stanley Black & Decker, Inc. provides power and

Stanley Black & Decker, Inc. § Stanley Black & Decker, Inc. provides power and hand tools, mechanical access solutions, and electronic security and monitoring systems primarily in the United States, Europe, Latin America, and Canada. Value Criteria P/S < Industry P/BV < Industry Dividends > Industry Positive Free Cash Flow SWK 1. 04 1. 63 2. 82% 579, 100, 000 Industry 1. 08 3. 25 1. 62% • • Purchased 215 shares @ $67. 61 Return of 20. 93%% since investment on 3/26/13 Value Strategy Investment Rationale: • Spending on home remodeling projects set to accelerate through 2013 due to an improving housing market and record low interest rates • SWK beats its peers in terms of revenue growth (23. 4%) and earnings growth (248. 1%); converts 1% of annual revenue growth into 10. 6% change in reported earnings

Time Warner Inc. § Time Warner Inc. operates as a media and entertainment company

Time Warner Inc. § Time Warner Inc. operates as a media and entertainment company in the United States and internationally. It operates in three segments: Networks, Film and TV Entertainment, and Publishing. They are headquartered in Summit, New Jersey and operated within the services sector offering magazine & internet publishing as well as motion picture & TV program production and distribution Value Criteria TWX Industry P/S < Industry 1. 5 1. 8 P/BV < Industry 1. 4 2. 2 Dividends > Industry 2. 3% 1. 2% Positive Free Cash Flow Yes *Source: Thomson Reuters Value Strategy Investment Rationale: • • Strong key ratio analysis with regards to net margin, ROA, ROE, ROIC and EPS growth Time Warner generates the most movie revenue and produces the most original TV shows on an annual basis compared with five other major studios NBC Universal, Disney, 20 th Century Fox, CBS and Sony • Purchased 250 shares at $44. 59 • Return of 27. 47% since purchase on 3/26/13

Microsoft § Microsoft Corporation is an American multinational corporation headquartered in Remond, Washington that

Microsoft § Microsoft Corporation is an American multinational corporation headquartered in Remond, Washington that develops, licenses and supports software products and services. It designs and sells hardware, and delivers online advertising to its customers. Value Criteria MSFT Industry P/S < Industry 3. 2 4 P/BV < Industry 2. 9 4 Dividends > Industry 2. 6% 0% Positive Free Cash Flow Yes *Source: Thomson Reuters Value Strategy Investment Rationale: • • Strong profit margin of 23. 3%, ROE of 27. 51%, massive FCF of $23. 62 B Regaining drive for innovation with user friendly Windows 8, Surface tablet, Windows phone, and search engine Bing • Purchased 350 shares at $31. 20 • Return of -9. 41% since purchase on 9/19

Dollar General § Dollar General is a discount retailer with 9, 961 stores located

Dollar General § Dollar General is a discount retailer with 9, 961 stores located in the southern, southwestern, midwestern and eastern U. S. DG differentiates itself through “small -box” stores with inventory customized based on local consumer preferences. Its product selection includes consumables, seasonal, home products and apparel Value: § § § Purchased 387 shares @ 51. 79 Return of (. 041)%, ($3. 64) since investment on October 3, 2012 Viewed as a hedge against a market downturn – DG’s beta is 0. 05 and has a relatively stable price history

Coach, Inc § Coach is a leather goods company that designs, produces, and markets

Coach, Inc § Coach is a leather goods company that designs, produces, and markets fine accessories for men and women. Its products include women’s and men’s bags, accessories, business cases, footwear, wearables, jewelry, sunwear, travel bags, watches and fragrance § § Strategically prices goods to capture middle market between designer luxury goods and low cost goods Growth Strategy Investment Rationale: Growth opportunities in Asia – already has distribution network in: South Korea, Taiwan, Malaysia, Hong Kong, Japan, China, Indonesia and India Demonstrated earnings power with a Trailing 5 -yr EPS of 15. 9% Revenue projected to grow 10. 4% by next year § § Purchased 250 shares @ 57. 90 Return of -15. 14% since investment on November 2, 2012 Growth Criteria SAP Required Revenue growth Industry Earnings Strong 5 yr CAGR ROE > 15% PEG < 1. 2 Debt/Equity < 1. 5 Industry 2. 40% 8. 50% 15. 00% 1. 2 1. 5 COH 13. 80% 12. 80% 54. 86% 1. 03 0. 01

Johnson & Johnson § Johnson & Johnson is the world’s largest health-care company, headquartered

Johnson & Johnson § Johnson & Johnson is the world’s largest health-care company, headquartered in New Brunswick, NJ. The company is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. • • Purchased 216 shares at $68. 75 Return of 1. 82% since investment on 11/16/12

Thermo. Fisher Scientific § Thermo Fisher is a health care company that was founded

Thermo. Fisher Scientific § Thermo Fisher is a health care company that was founded in 1956. The company is a provider of many analytical equipment products. They have analytical technologies, specialty diagnostics and laboratory product segments within the business. Value Strategy Investment Rationale: Value Criteria TMO Industry P/S < Industry 1. 8 2. 5 P/BV < Industry 1. 5 3 Dividends > Industry 1% 1% Positive Free Cash Flow 1, 613, 000 • • Acquisition of One Lambda expected to earn $. 09 -$. 11 per share through 2013 In comparison to the industry, TMO is trading at a significant discount in terms of Trailing PE, Forward PE, and Forward PEG • • Purchased 240 shares at $60. 87 Return of 23. 65% since investment on 3/26/13

Con. Agra § Nebraska Consolidated Mills formed in 1919 and became Con. Agra in

Con. Agra § Nebraska Consolidated Mills formed in 1919 and became Con. Agra in 1971. They began purchasing over 100 prepared food brands starting in 1980 and their products are currently in 97% of American households. Their consumer products consist of commercial foods and consumer products. Value Strategy Investment Rationale: • Strong historical investment performance greater than competitors • Moderate correlation to S&P 500 of. 4348 below average of. 6513 for our portfolio adding diversity and limiting volatility • Purchased 360 shares at $27. 58 • Sold Shares on: XXXX at $35. 46? ? ?

Entergy § Entergy is an integrated energy company. The company has both a utility

Entergy § Entergy is an integrated energy company. The company has both a utility portion of their business as well as a wholesale commodities. They are involved in electric power production and distribution. They were founded in 1989 and are headquartered in New Orleans, Louisiana. The company generates, transmits and distributes electric power and natural gas. Value Strategy Investment Rationale: • Value Criteria ETR Industry P/S < Industry 1. 16 1. 5 P/BV < Industry 1. 39 1. 4 Dividends > Industry 4. 7% 4% Positive Free Cash Flow Yes • Trading at a significant discount in comparison to the industry average and their closest competitors with regards to Price/Earnings, Price/Book, Price/Sales and Forward P/E Entergy also offers an attractive dividend of 4. 7% with consistent growth • Purchased 242 shares at $70. 35 • Return of -10. 99% since purchase on 10/17

Enterprise Product Partners operates natural gas liquids. It provides midstream energy services to producers

Enterprise Product Partners operates natural gas liquids. It provides midstream energy services to producers and consumers of natural gas, crude oil and refined products. Its midstream energy operations include natural gas gathering, treating, processing, transportation and storage § § Growth Strategy Investment Rationale: U. S. project to claim spot as the world’s leading oil manufacturer EPD has delivered 12 straight positive earnings surprises, with an average surpise of 10% Strong liquidity and ability to transform assets into cash-generating projects makes it a leader among MLPs § § Purchased 187 shares @ 54. 26 Return of 9. 91% since investment on October 3, 2012 Growth Criteria SAP Required Revenue growth Industry Earnings Strong 5 yr CAGR ROE > 15% PEG < 1. 2 Debt/Equity < 1. 5 Industry 7. 10% 11. 90% 1 1. 16 EDP 7. 70% 6. 50% 17. 43% 0. 26 1. 19

Dividend Strategy Analysis

Dividend Strategy Analysis

Dividend Strategy Buy Criteria § Dividend Yield ≥ SPDR S&P Dividend ETF § Quick

Dividend Strategy Buy Criteria § Dividend Yield ≥ SPDR S&P Dividend ETF § Quick Ratio ≥ Industry Average § Total cash dividends paid annually § Total cash from investing activities § Total cash from operating activities § Is there a constant dividend? § Is there historical and potential dividend growth? Stop Loss Criteria § 20% below purchase price is all buy criteria are met § Consider crawling / trailing stops to protect profits. Sell Criteria § Superior investment alternatives are identified § Dividends are cut § Free cash flow diminishes § Stock price loses (≈20%)

Dividend Strategy Performance Sector Acquisition Date Price Purchased Market Price Market Value Capital Return

Dividend Strategy Performance Sector Acquisition Date Price Purchased Market Price Market Value Capital Return Gain/(Loss) Johnson & Johnson Health Care $68. 75 11/16/2012 $79. 29 $17, 273. 22 $2, 296. 13 15. 331% Linn Energy $38. 33 2/22/2013 $37. 12 $10, 393. 60 $($338. 52) -3. 154% Energy The dividend strategy comprises 5. 08% of the SAP fund.

Johnson & Johnson § Johnson & Johnson is the world’s largest health-care company, headquartered

Johnson & Johnson § Johnson & Johnson is the world’s largest health-care company, headquartered in New Brunswick, NJ. The company is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. Dividend Strategy Investment Rationale: • Constant dividend increases since 1997, 7% dividend increase in May 2012. • Johnson and Johnson saw worldwide sales of $49. 7 billion through Q 1 -Q 3 in 2012. This included a domestic sales increase of 13. 4% and an international sales increase of 1. 4%. • The most diverse health care company, specializing in medical devices. • Very strong free cash flow of $12. 46 billion Dividend Criteria JNJ Industry Div Yield > Industry 3. 07% 3. 32 Quick Ratio > Industry 1. 59 Cash from Investing $4. 51 billion Cash from Operating $15. 39 billion Annual Cash Dividends + Constant Dividends Yes Dividend Growth Yes • • Purchased 216 shares at $68. 75 Return of 15. 33% since investment on 11/16/12 1. 79

Linn Energy § Linn Energy is an independent oil and natural gas company focused

Linn Energy § Linn Energy is an independent oil and natural gas company focused on the development, exploitation and acquisition of natural gas. Headquartered in Houston, Texas it contains over two dozen domestic locations located in six operating regions throughout the United States: Mid-Continent Deep, Mid. Continent Shallow, Permian Basin, Michigan, California, and Williston Basin. Dividend Criteria LINE Industry Dividend Strategy Investment Rationale: • Constant dividend increases since IPO in Div Yield > Industry 7. 96% 3. 2 2006, including 6% dividend increase in Quick Ratio > Industry 0. 51 0. 34 2012. Cash from Investing $3. 68 billion • Linn Energy has seen a 73. 7% increase in Cash from Operating $350. 9 million year-over-year quarterly revenue growth, including a 210. 3% sales increase from 2010 Annual Cash Dividends $596. 9 million Constant Dividends Yes -2011 Dividend Growth Yes • LINE provides beta of 0. 69, well below industry average of 1. 47 • Purchased 280 shares at $38. 33 • Return of (-3. 154%) since acquisition on 2/22/2013

ETF Strategy Analysis

ETF Strategy Analysis

ETF Growth & Value Strategies Buy Criteria: § § § Average 3 month volume:

ETF Growth & Value Strategies Buy Criteria: § § § Average 3 month volume: Portfolio P/E: Beta (3 years): Net Assets: Expense Ratio: Evaluate: § P/E doesn’t meet criteria § Price drops 10% Growth Value ≥ 600 MM Shares 14 ≤ P/E ≤ 22 ≤ 1. 25 ≥ $250 MM ≤ 0. 9% ≥ 600 MM Shares ≤ S&P 500 ≤ 1 ≥ $250 MM ≤ 0. 9% Sell Criteria: § Sector no longer viewed favorably § Superior investment alternatives are identified

ETF Strategy § § § § The Fund's objective is to outperform the S&P

ETF Strategy § § § § The Fund's objective is to outperform the S&P 500 by over and underweighting different sectors. Initially, we purchased 9 ETFs to represent the different sectors and weighted our holdings accordingly. We sold off portions of ETFs in order to purchase individual stocks within that sector. As of 3/21, The Fund maintains holdings in all ETFs except Health Care. Information Technology ETF continued to underperform this semester so portions were reallocated to stocks from other sectors Underperforming investments were sold and reallocated to rebalance the portfolio throughout the semester The overall percentage of ETF investments in The Fund decreased from 41. 04% to 37. 33% ETF Ticker Consumer Discretionary XLY Consumer Staples XLP Energy XLE Financials XLF Industrials XLI Information Technology XLK Materials XLB Utilities XLU Health Care XLV

ETF Strategy Performance Company Acquisition Price Date Purchased XLY Consumer Discretionary $46. 87 9/28/12

ETF Strategy Performance Company Acquisition Price Date Purchased XLY Consumer Discretionary $46. 87 9/28/12 XLP Consumer Staples $36. 21 10/2/12 XLE Energy $73. 72 10/2/12 XLF Financials $15. 67 10/2/12 XLI Industrials $36. 71 10/2/12 XLK Information-Technology $30. 80 10/2/12 XLB Materials $36. 77 10/2/12 XLU Utilities $36. 41 10/2/12 Market Price Market Value Capital Gain/(Loss) $1, 193. 86 $52. 05 $11, 994. 16 $49, 318. 8 6 $ 3, 512. 22 $38. 99 $24, 643. 9 $78. 34 9 $1, 452. 53 $28, 053. 8 $18. 20 3 $3, 896. 54 $22, 445. 3 2 $2, 592. 14 $41. 50 $42, 642. 6 $29. 97 0 ($1, 183. 94) $16, 151. 3 8 $1, 020. 55 $39. 25 $7, 867. 8 $38. 14 9 $356. 05 Total: $12, 839. 95 The ETF strategy comprises 37. 33% of the SAP fund. Return 11. 054% 7. 668% 6. 263% 16. 130% 13. 057% -2. 701% 6. 745% 4. 740%

Strategic Analysis Contribution Section 1. 2 - Strategic Analysis Sector S&P Contribution Portfolio Consumer

Strategic Analysis Contribution Section 1. 2 - Strategic Analysis Sector S&P Contribution Portfolio Consumer Discretionary 11. 230% 18. 21% Consumer Staples 10. 920% 14. 66% Energy 11. 130% 11. 22% Financials 15. 140% 10. 02% Health Care 12. 260% 18. 80% Industrials 10. 140% 9. 19% Information-Technology 19. 070% 7. 90% Materials 3. 520% 4. 86% Telecommunications 3. 160% 0. 00% Utilities 3. 450% 1. 44%

Composite List of Holdings Contd. SAP Fund Portfolio Holdings (Table) Unitedhealth Group, Inc. Celegene

Composite List of Holdings Contd. SAP Fund Portfolio Holdings (Table) Unitedhealth Group, Inc. Celegene Corporation Starbuck's Corporation Consumer Discretionary Consumer Staples Energy Financials Industrials Information-Technology Materials Utilities Dollar General Enterprise Products Partners LP Halliburton Blackrock Inc. Target Stanley Black and Decker Thermo Fisher Scientific Time Warner Cable Johnson and Johnson Francescas Holdings Corporation Sherwin Williams Co. United Technologies Corporation Cigna Corporation CVS Caremark Corporation Johnson Controls Inc NU Skin Enterprises CL A Gilead Sciences Inc. Linn Energy Michael Kors Holdings F Ticker Symbol UNH CELG SBUX XLY XLP XLE XLF XLI XLK XLB XLU DG EPD HAL BLK TGT SWK TMO TWX JNJ FRAN SHAW UTX CI CVS JCI NUS GILD LINE KORS Mkt Value $22, 283. 51 $27, 064. 10 $23, 185. 59 $12, 243. 03 $63, 971. 29 $24, 889. 36 $28, 100. 07 $22, 385. 83 $43, 112. 14 $15, 929. 17 $8, 080. 37 $8, 699. 76 $11, 418. 25 $14, 036. 96 $26, 983. 61 $18, 015. 23 $17, 380. 77 $18, 383. 90 $14, 483. 40 $17, 946. 38 $7, 732. 62 $10, 090. 20 $10, 278. 40 $11, 189. 40 $10, 719. 15 $5, 516. 80 $12, 939. 84 $11, 572. 80 $10, 886. 40 $6, 887. 50 Weights 4. 02% 4. 88% 4. 18% 2. 21% 11. 53% 4. 49% 5. 07% 4. 04% 7. 77% 2. 87% 1. 46% 1. 57% 2. 06% 2. 53% 4. 87% 3. 25% 3. 13% 3. 31% 2. 61% 3. 24% 1. 39% 1. 82% 1. 85% 2. 02% 1. 93% 0. 99% 2. 33% 2. 09% 1. 96% 1. 24%

SAP Fund Sector Holdings 3. 29% 4. 69% 1. 46% 0. 00% 18. 21%

SAP Fund Sector Holdings 3. 29% 4. 69% 1. 46% 0. 00% 18. 21% 7. 77% 9. 02% 15. 04% 19. 55% 11. 04% 9. 93% Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information-Technology Materials Telecommunications Utilities Cash

Company Unitedhealth Group, Inc. Celegene Corporation Starbuck's Corporation Consumer Discretionary Consumer Staples Energy Financials

Company Unitedhealth Group, Inc. Celegene Corporation Starbuck's Corporation Consumer Discretionary Consumer Staples Energy Financials Industrials Information-Technology Materials Utilities Dollar General Enterprise Products Partners LP Halliburton Blackrock Inc. Target Stanley Black and Decker Thermo Fisher Scientific Time Warner Cable Johnson and Johnson Francescas Holdings Corporation Sherwin Williams Co. United Technologies Corporation Cigna Corporation CVS Caremark Corporation Johnson Controls Inc NU Skin Enterprises CL A Gilead Sciences Inc. Linn Energy Michael Kors Holdings F Ticker Symbol UNH CELG SBUX XLY XLP XLE XLF XLI XLK XLB XLU DG EPD HAL BLK TGT SWK TMO TWX JNJ FRAN SHAW UTX CI CVS JCI NUS GILD LINE KORS Sector Health Care Consumer Discretionary Consumer Staples Energy Financials Industrials Information-Technology Materials Utilities Consumer Staples Energy Financials Consumer Discretionary Industrials Health Care Consumer Discretionary Materials Industrials Health Care Consumer Staples Consumer Discretionary Health Care Energy Consumer Discretionary Strategy Growth ETF ETF Value Growth Value Growth Growth Dividend Growth

SAP Holdings by Strategy 1. 96%3. 29% 39. 43% 39. 40% 15. 92% ETF

SAP Holdings by Strategy 1. 96%3. 29% 39. 43% 39. 40% 15. 92% ETF Value Growth Dividend Cash

co m s iti e 10. 000% til 15. 000% U ns tio ria

co m s iti e 10. 000% til 15. 000% U ns tio ria ls at e ic a un m M gy ia ls lo no ch s ia l rg y s Ca re tr us ea lth In d H En e le ap St ry na tio na nc er Fi um cr e is n. Te at io le Te or m In f D ns Co er um ns Co Sector Holdings 25. 000% 20. 000% S&P 500 Contribution Portfolio Contribution 5. 000% 0. 000%

Return By Strategy Growth Value Benchmark SAP Fund ETF Dividen d -5 0 5

Return By Strategy Growth Value Benchmark SAP Fund ETF Dividen d -5 0 5 10 15 20

Beta vs. Returns 60. 00% CELG 50. 00% 40. 00% BLK 30. 00% CAG

Beta vs. Returns 60. 00% CELG 50. 00% 40. 00% BLK 30. 00% CAG TWX 20. 00% Linear(Beta) 10. 00% 0 -10. 00% 0. 2 XLK 0. 4 0. 6 0. 8 1 DG 1. 2 1. 4 FRAN 1. 6 KORS -20. 00% 1. 8