John L. Grove College of Business INVESTMENT MANAGEMENT ...

INVESTMENT MANAGEMENT PROGRAM

John L. Grove College of Business

2014 Annual Report

ship.edu/business/imp

Shippensburg University

ii Investment Management Program

2014 Annual Report iii

Mission StatementThe Investment Management Program (IMP) is aimed at providing students with the skills, theory, and concepts

needed to become portfolio managers through a proactive educational environment. The intent of the IMP is to provide academic scholarships for the finance program in the future.

Table of Contents

Letter to Friends and Affiliates ................................................................................................... iv

Introduction .................................................................................................................................1Executive Summary ....................................................................................................................2

Investment Objective ..........................................................................................................................2Investment Strategy ...........................................................................................................................2Asset Allocation .................................................................................................................................2Portfolio Performance .........................................................................................................................2

Investment Strategy ....................................................................................................................3Equity .................................................................................................................................................3Fixed-Income Securities .....................................................................................................................3

Portfolio Characteristics ..............................................................................................................4Equity Sector Allocation .....................................................................................................................4Top Ten Holdings.................................................................................................................................4

Portfolio Performance ..................................................................................................................5Contributors and Detractors—Equity Portion of the Portfolio ..............................................................5Contributors and Detractors—Fixed-Income Portion of the Portfolio ..................................................6

Risk-Adjusted Performance .........................................................................................................7Portfolio Holdings ................................................................................................................... 8-55

Underweight—Consumer Discretionary Sector ..................................................................................8Underweight—Consumer Staples Sector .........................................................................................12Underweight—Energy Sector ...........................................................................................................15Underweight—Financial Sector .......................................................................................................18Overweight—Health Care Sector .....................................................................................................23Overweight—Industrials Sector .......................................................................................................30Overweight—Information Technology Sector ...................................................................................35Overweight—Basic Materials ..........................................................................................................42Underweight—Telecommunications Sector .....................................................................................45Underweight—Utility Sector ............................................................................................................46

Investment Management Program Portfolio 2014 Performance ................................................56

Investment Management Program Portfolio Contributors ..........................................................57

Finance Advisory Council 2014-2015 ........................................................................................58

iv Investment Management Program

May 2, 2015

Dear Stakeholders,

The spring 2015 Investment Management Program (IMP) class is honored to have the opportunity to present to you the IMP portfolio’s performance in 2014, and provide you with an update of our progress. The IMP class has been provided with the opportunity to apply the knowledge and skills that we have learned in the classroom to a real world investing experience that has set us apart from our peers. Managing the IMP portfolio has been an invaluable experience that we will carry with us throughout the rest of our careers. Not only have we had the opportunity to handle real money and gain investment skills, but we have been able to enhance our leadership and team work abilities.

We would like to thank Mr. Frank Wisman for his original contribution that initiated the IMP fund in 1994. In addition, we would like to thank the Provost, Dr. Barbara Lyman; the Grove College of Business Deans and professors; and the Finance Advisory Council members for their support and assistance to fund our trip to attend the Quinnipiac Global Asset Management Education (G.A.M.E.) Forum that was held in New York City in March 2015. We are extremely proud to an-nounce our achievement of first place in the Undergraduate Hybrid Fund category at the G.A.M.E. Forum for our 2014 portfolio.

In the following report, you will find the IMP portfolio’s investment objective, strategy, process, performance, and current holdings.

Any comments, questions or suggestions that you may have are always welcomed and appreciated ([email protected]).

We are truly grateful for your continued generosity and support of the Investment Management Program.

Sincerely,

The Spring 2015 IMP Portfolio Managers

Letter to Friends and Affiliates

John L. Grove College of Business

Shippensburg University1871 Old Main DriveShippensburg, PA 17257-2299

www.ship.edu/business

Office: 717-477-1435Fax: [email protected]

A member of Pennsylvania’s State System of Higher Education

2014 Annual Report 1

Introduction

Fall 2014 IMP Class (Front L to R): Jacob Landis, Kierna Stimley, Lisa Robbins, Binh Tran (Back L to R):Chad Brooks, Colin Ward, John Dickson, Freddie Powell

The 2014-2015 Investment Management Program (IMP) class is honored to share the progress made this past year. This has been an invaluable experience, and the knowledge obtained from this program will carry into each member’s professional career. The students were extremely excited to participate in the program this year, especially considering that this was the first year a scholarship will be awarded from the fund. The class is also happy to report that the portfolio’s value has reached $141,140 (over $100,000, the original target amount) as of December 31, 2014.

IMP is composed of four sub-groups such as accounting, adminis-trative, public relations, and Global Asset Management Education (G.A.M.E.) taskforce groups. The accounting group is responsible for updating the portfolio. The administrative group handles any structural class changes and prepares the annual and semi-annual reports. The public relations group is responsible for the display case in the College of Business lobby, fundraising, and the pro-gram’s exposure. The G.A.M.E. taskforce completes all necessary documents for the class to attend the G.A.M.E. Forum held in New York City. In addition, each student monitors about three stocks within a sector and informs the class of any updates or news of the assigned stocks. The class maintains a live discussion board through GroupMe (a group text app), D2L, and email to ensure constant communication throughout each semester. The class utilizes these communication mediums for continued discussion regarding various in-class topics, such as sector and stock updates, semester timeliness, and topic suggestions for future class meetings.

The Finance Advisory Council continues to oversee the IMP program. With their guidance and insight, IMP has evolved into a productive and valuable program.

For additional information on IMP, please visit the IMP website at www.ship.edu/business/imp.

Spring 2015 IMP Class (Front L to R): Ben Shenk, Lisa Robbins, Chelsea Scomak, Leah Johnson, Marie Smith, Dave Calambas(Back L to R): Colin Ward, John Dickson, Spencer Haines, Chad Brooks, Mike Kuder, Jeremie Patrick

2 Investment Management Program

Investment ObjectiveTo achieve a risk-adjusted return higher than the benchmark set by the Finance Advisory Council (i.e., 60% Financial Times Stock Exchange All World Stock Index, and 40% Barclays US Aggregate Bond Index) and the IMP benchmark (i.e., 80% of the S&P 500 Index and 20% of the Barclays US Aggregate Bond index).

Investment StrategyThe IMP class invests in both equity and fixed-income securities. We have different characteristics that we look for in each type of investment.

x IMP invests in stocks with the following characteristics:

- Companies with a proper business plan and strategy

- Sound financial fundamentals and ability to manage debt

- Stock trades at a significant discount to estimates of intrinsic values

- Strong management group

x IMP invests in fixed-income securities with the following characteristics:

- Credit rating is BBB or higher according to Standard & Poor’s ratings

- Duration is between 1 and 10 years

Executive SummaryAsset Allocation

x As of December 31, 2014, the portfolio’s value was $144,140, composed of $113,489 (78.74%) in equity securities, $14,806 (10.27%) in fixed-income securities, and $15,845 (10.99%) in a money market account

x The portfolio is composed of 31 stocks, 4 high dividend-yield ETFs, and 4 fixed-income ETFs

Portfolio Performance x The return of the IMP Portfolio in 2014 was 14.39%, com-

pared to the 12.15% of the IMP benchmark

x For the risk-adjusted performance, the IMP Portfolio’s Sharpe ratio is 2.09, compared to 1.6 of its benchmark. The IMP’s Treynor ratio is 15.54 relative to 13.44 of its benchmark. The results show that the IMP Portfolio outperformed its bench-mark in both measurements.

PORTFOLIO CHARACTERISTICS IMP ASSET ALLOCATION

Price/Earnings (P/E) 20.46 Equity: 78.74%

Price/Book (P/B) 3.71 Bond: 10.27%

ROE (%) 20.68 Cash: 10.99%

Dividend Yield (%) 2.0 ---

Market Cap (Billion) 112.41 ---

Beta 0.67 ---


Investment StrategyThe IMP class follows the top-down investment approach by analyzing the economy, sectors and industries, and companies to identify good investments. We focus on undervalued securities, which may be diversified across different asset classes.

EquityThe portfolio managers strive to invest in stocks of good-quality companies which meet the following characteristics:

x Firm Fundamentals: The firm must have proper business plans and strategies to be considered for investments. A good company should possess unique products and services, nego-tiation power against suppliers, a growing customer base, and competitive advantages in its industry. We conduct a SWOT analysis to identify a company’s strengths and weaknesses along with opportunities and threats.

x Undervaluation: The class focuses on researching stocks that are traded at a significant discount to its intrinsic value estimate. Highly undervalued stocks tend to have more room for the price to appreciate, and thus will contribute the most value to the portfolio.

x Strong Financials: We select companies that demonstrate sound financial conditions and the ability to manage their debt. These aspects are essential for a company to generate positive cash flows.

x Shareholder’s Perspective: We select only companies that have a good management team. Firms with strong top management are able to make better decisions to maximize shareholder wealth.

Our investment considerations also include:

x Growth Characteristics: We invest in innovative companies with strong growth potential. In order for a company to meet the innovation standards, the company must continuously im-prove its products and technologies to stay competitive. New technologies, patents, prominent future growth, and growing market share are also major factors for growing firms.

x Value Characteristics: We seek companies that have a domi-nating market share in their industry, steady earnings growth, and consistent dividend payments.

Financial analysis examines a firm’s key financial ratios over the past several years and also compares them to competitors to determine whether the company maintains a sound financial position. The financial analysis is based on, but not limited to, the following financial ratios:

x Solvency and Financial Leverage Ratios

- Current Ratio > 1

- Long-term Debt to Equity < Industry Average

- Debt to Equity < industry Average

x Efficiency Ratios

- Receivable Turnover > Industry Average

- Inventory Turnover > Industry Average

- Asset Turnover > Industry Average

x Profitability Ratios

- Net Profit Margin > Industry Average

- 5-Year Average Net Profit Margin > Industry Average

- ROA > Industry Average

- ROE > Industry Average

x Growth Rates

- Historical 5-Year Average EPS Growth Rate > Industry Average

- Historical 5-Year Average Sales Growth Rate > Industry Average

x Valuation Ratios

- Price/Free Cash Flow < Industry Average

Fixed-Income SecuritiesFor fixed-income securities, we evaluate such specific characteristics as credit risk and duration:

x Credit Risk: We invest in bonds with a credit rating of BBB or higher, based on Standard & Poor’s ratings.

x Duration: The duration of bonds is based upon the predic-tion of future interest rates. Since interest rates are expected to rise in the future, we invest in bonds with shorter duration than that of the benchmark.


Portfolio CharacteristicsThe IMP portfolio is a balanced, hybrid fund with the aim of 80% equities and 20% fixed-income securities. As of December 31, 2014, the IMP Portfolio consisted of 78.74% equities, 10.27% fixed-income and 10.99% money market fund. At the end of 2014, the value of the portfolio reached $141,140.

Equity Sector AllocationThe IMP fund had invested in nine of the ten S&P (GICS) Global Industry Classification System sectors, excluding Telecommunica-tions. Five sectors have investment weights higher than those of the S&P 500, while the other five remain underweight. In an attempt to outperform the S&P 500, the class followed the top-down ap-proach. The class began by first evaluating the economy, followed by sectors to determine which sectors the class should overweight, market weight, and underweight, relative to the S&P 500 Index. The overweight sectors include Consumer Discretionary, Health Care, Industrials, Information Technology, and Materials. The un-derweight sectors consist of Consumer Staples, Energy, Financials, Telecommunication, and Utilities. As of December 31, 2014, the sector specific weights of the IMP portfolio along with the S&P 500 index are shown below.

Top Ten HoldingsThe top ten holdings make up nearly 45% of the portfolio with around 10% of that in a Money Market fund. The top ten hold-ings include Money Market, Lowe’s Companies Inc., United-Health Group, Novartis AG ADR, PowerShares S&P 500 $ High Dividend Portfolio, Vanguard High Dividend Yield ETF, Danaher Corp, Intel Corp, PowerShares Senior Loan Portfolio, and iShares iBoxx $ High Yield Corporate Bond ETF. The top ten holdings along with their market values and weights are shown in the table below.

TOP TEN HOLDINGS AS OF DECEMBER 31, 2014

SECURITIES MARKET VALUE WEIGHT

Money Market $15,845.11 10.99%

Lowe’s Companies Inc. $6,880.00 4.77%

UnitedHealth Group Inc. $6,065.40 4.21%

Novartis AG ADR $6,022.90 4.18%

PowerShares S&P 500 High Dividend Portfolio

$5,847.30 4.06%

Vanguard High Dividend Yield ETF

$5,568.75 3.86%

Danaher Corp $5,142.60 3.57%

Intel Corp $5,082.00 3.52%

Powershares Senior Loan Portfolio

$4,998.24 3.47%

iShares iBoxx $ High Yield Corporate Bond ETF

$4,928.00 3.42%

SECTOR IMP IMP TARGET WEIGHT

S&P 500

Consumer Discretionary 12.87% 12.00% 12.10%

Consumer Staples 4.95% 7.00% 9.90%

Energy 6.23% 7.00% 8.30%

Financials 8.26% 7.00% 16.00%

Health Care 24.11% 22.00% 14.90%

Industrials 13.59% 11.00% 10.30%

Information Technology 23.99% 24.00% 19.50%

Materials 3.44% 3.50% 3.20%

Telecommunication 0% 3.50% 2.30%

Utilities 2.57% 3.00% 3.40%

Over and under indicate overweight and underweight, respectively.


Portfolio PerformanceIn 2014, the IMP portfolio outperformed both the IMP class benchmark (80% S&P, 20% Barclay US Aggregate) and the FAC benchmark (60% FTSE All-World Index, 40% Barclays). IMP outperformed its benchmark by 1.94%, and the FAC benchmark by 10.39%. The graph below shows the performance of the IMP portfolio in relation to the IMP class benchmark month by month. The IMP portfolio outperformed the benchmark 9 months dur-ing 2014.

SECTOR PERFORMANCE OF IMP COMPARED TO THE S&P 500

Sector IMPReturn

S&P 500 Return

IMP Sector Contribu-tion

S&P 500 Sector Contribu-tion

Consumer Discretionary

24.1% 9.7% 3.1% 1.2%

Consumer Staples 5.7% 16.0% 0.3% 1.5%

Energy 3.4% -7.8% 0.2% -0.8%

Financials 5.7% 15.2% 0.5% 2.4%

Health Care 18.7% 25.3% 4.5% 3.3%

Industrials 14.8% 9.8% 2.0% 1.0%

Information Technology

23.7% 20.1% 5.7% 3.9%

Materials 9.3% 6.9% 0.3% 0.2%

Telecommunication 0.0% 3.0% 0.0% 0.1%

Utilities 29.2% 29.0% 7.5% 0.9%

Total 16.92% 13.69% 17.4% 13.7%

S&P 500 sector contributions based upon sector weighting as of 7/17/2014, IMP sector performance excludes performance from fixed income, cash equivalents, and ETFs, and any other non-stock security

Contributors and Detractors— Equity Portion of the Portfolio

One of the main reasons the IMP Portfolio outperformed the benchmark in 2014 was due to the class’s asset allocation. Weights of the Information Technology and Health Care sectors were increased in the fourth-quarter of 2014, resulting in the largest contribution to the portfolio’s growth. The two combined sectors comprised roughly 48% of the IMP Portfolio, above the target weight of 46% and the S&P 500 weight of 34.5%. In the Health Care sector, the IMP Portfolio gained 18.66%, compared to 25.3% of the S&P 500 Index. In the Information Technology sector, IMP Portfolio achieved a return of 23.71% relative to a 20.1% that the S&P 500 Index experienced.

Contributors x The top three contributors to the IMP Portfolio were Intel

Corp, Lowe’s Companies Inc., and Apple Inc. Intel experi-enced great demand for its chip and atom processors due to increased demand in personal computers. Lowe’s benefited greatly from a housing market rebound, increased contractor sales, increased market share, and dominance over competi-tors (e.g., Home Depot and Sears). Apple experienced strong growth following its 7:1 stock split because of its more at-tractive stock price. Apple has also continued to develop and release very popular products (e.g., iPhone 6), which penetrated the global market.

x Health Care industries demonstrated strong performance in 2014. UnitedHealth has shown strong price momentum throughout 2014 and is expected to continue in 2015. Price momentum was coupled by investors’ confidence in post-merger performance and the growth of Optum, UnitedHealth’s pharmacy benefit manager. Gilead Sciences and Amgen were two biotech companies that experienced the monumental wave of growth in the biotech industry throughout 2014. Novartis benefited from the strength of the Swiss franc, and Abbott Labs from a price boost after spinning off AbbVie. Cerner Corp, a late addition to the portfolio, provided a return of 11.07% over the last three months in 2014, as they have created an essential niche in the Health Care Information Technology Industry.

x The Information Technology sector was our most profitable sector, providing around $4,500 in capital gains. Interestingly, matured stocks such as Microsoft and Cisco experienced a revival of investor interest, coinciding with their heavy cloud investments.


Portfolio PerformanceDetractors

x The IMP Portfolio had a few detractors in 2014. The only stock that experienced a price decline was Exxon Mobil by -8.6%. At the end of 2014, the energy sector took a huge hit due to declining oil prices. Because of the yearlong struggle of Exxon Mobil and the energy sector as a whole, the class continuously evaluated the holdings in this sector to determine the best move for the portfolio.

x Amgen Inc. with a return of -1.58%, was the second detractor due to bad purchasing time. However, Amgen remains a strong investment as they have several drug releases for the coming years. The drug releases expected in the next three years include a multi-billion dollar cholesterol drug among others.

x American Tower Corp (AMT), with a return of -3.12%, was the third detractor. Organized as a REIT, AMT owns cell phone towers across the U.S. and has penetrated foreign mar-kets. The managers maintain that AMT is a viable investment for long-term growth due to the strong performance of REITs.

x Financials provided a return of +5.66%, compared to 15.2% for the sector. The year 2014 proved to be a challenging year for financials. The class constantly analyzed the sector to find the best investment options and eliminate poor performers (e.g., Toronto Dominion) from the portfolio.

Contributors and Detractors – Fixed-Income Portion of the Portfolio

At the end of 2014, the Fund’s fixed income was heavily overhauled as the ETFs and fixed income holdings were detracting. DSUM Chinese Yuan and Global High Yield Corporate Bond HYXU were sold with a loss of -6.12% and -6.99%, respectively. The loss was recovered with the purchase of three new funds, including TLT, HYG, and VBMFX.

Contributors x High dividend yield ETFs were all contributors in 2014

because their performance was heavily tied to the S&P 500. SPHD (An S&P 500 ETF) gained 15.8%; SDY (SPDR S&P Dividend) gained 8.5%; VYM (Vanguard) gained 10.3%; and DYM (WisdomTree Large Cap) gained 11.5%. The final three were all large contributors due to their record corporate earnings and increased cash levels.

x Vanguard Bond Fund Index Fund (VBMFX) was purchased on December 31, 2014. This fund is a mix of sovereign debt and agencies, and high quality corporate debt.

Detractors x The aforementioned detractors have been sold. DSUM was a

risky fund because of the lack of transparency in the Chinese market. The decision to sell was unanimous.

x HYXU suffered a loss of -6.99% in 2014, due to the chal-lenging environment for high yield corporate bonds in the global market. Because HXYU is a global fund, the worldwide recession continues to inhibit positive growth. HYG, the U.S. version of this fund, also suffered a loss of -3.1%. However, the class decided to hold this with the hope of the strong USD helping this security.

x TLT, a 20+ year Treasury Bond Index, resulted in a loss of -0.1% at the end of 2014. While interest rates are expected to rise, all evidence seems to support the short-term end of the yield curve rising, while the long-term end remains rather flat. Increasing demand for the USD worldwide will provide a balancing effect for the yield curve, along with the massive holdings by the Federal Reserve (e.g., $45 trillion in QEs, other mortgage backed securities), which gives the Fed a reason to slowly increase the long-term interest rates. TLT has experi-enced its best performance when the S&P 500 performs poorly.

FIXED-INCOME ETFS SALE PROCEEDS

INITIAL VALUE

GAIN/LOSS INTEREST RETURN DATE SOLD

PowerShares Chinese Yuan DimSum Bond Portfolio (DSUM) $4,824.02 $5,179.98 -$355.96 $160.60 -6.12% 12/30/14

iShares Global Ex USD High Yield Corporate Bond ETF (HYXU) $4,691.89 $5,065.19 -$373.30 $203.37 -6.99% 11/12/14


Risk-Adjusted PerformanceDuring 2014, the IMP portfolio’s return was 14.39%, which ex-ceeded the IMP class benchmark return of 12.15%. The 3-year average annual return of the benchmark is 16.95%, which exceeded the IMP portfolio’s 3-year average annual return of 15.04%. The 5-year average annual return of the benchmark is 13.45%, which also exceeded the IMP portfolio’s 5-year annual return of 11.43%. The IMP portfolio does not outperform the benchmark in the 5-year average annual return due mainly to the loss of 4.81% in 2011. In contrast, the benchmark had a return of 2.21% in 2014.

To compare the risk-adjusted performance, the Sharpe and the Treynor ratios were calculated for the IMP portfolio and its bench-

1-YEAR 3-YEAR 5-YEAR

IMP BENCHMARK IMP BENCHMARK IMP BENCHMARK

Average Annual Return (%) 14.39 12.15 15.04 16.95 11.43 13.45

Risk Measure

Standard Deviation (%) 6.94 6.73 7.70 7.28 11.52 12.25

Beta 1.00 1.00 0.97 1.00 0.89 1.00

Risk-Adjusted Performance

Sharpe Ratio 2.07 1.81 1.95 2.33 0.99 1.01

Treynor Ratio (%) 14.41 12.15 15.49 16.95 12.80 13.45

(Note) Sharpe ratio = (Portfolio’s return) / (its standard deviation); Treynor ratio = (Portfolio’s return) / (its beta)

mark (see the note in the table below). Sharpe and Treynor ratios larger than that of their benchmark indicate that the portfolio has higher risk-adjusted return. The IMP portfolio’s 1-year, 3-year, and 5-year Sharpe ratios are 2.09, 1.95, and 1.18, respectively, compared to the benchmark’s Sharpe ratios of 1.94, 1.21, and 1.06. This sug-gests that the IMP portfolio outperformed the benchmark over the last five years. The IMP portfolio’s Treynor ratios for 1-year, 3-year, and 5-year are 15.25%, 15.55%, and 15.25%, respectively, compared to the benchmark’s 12.15%, 13.35%, and 16.21%. The results show that the IMP portfolio outperformed the benchmark over the previous one year but underperformed during the last three and five years.


PORTFOLIO HOLDINGS 2014

Underweight Consumer Discretionary Sector

Sector Overview

The consumer discretionary sector offers non-essential goods and services. Such companies include retailers, restaurants, media com-panies, automobile and component companies, etc. The Consumer Discretionary sector has historically performed better during the early business cycle when the overall market performs well.

After almost a year of focusing on essential goods, investors turned to funds that would grow as U.S. consumers spend more money on discretionary items. Data presented in November 2014 showed the U.S. economy was expanding faster than expected. This encouraged investors to look to the Consumer Discretionary sector. Investors became confident that the growing U.S. economy, stable job growth and lower gas prices would encourage consumers to spend more. Although this sector had a rough start in 2014 with a decline of 5.5% through October, the sector gained 16% for the year.

The steep decline in oil prices has given investors a positive outlook for the Consumer Discretionary sector, with the expectation that consumers will spend the saved money from oil on discretionary items. Although the sector has experienced an increase in consumer spending, a growing number of consumers seem to be more interested in saving and paying down debt than in the past.

Specialty Retail Overview

The Specialty Retail Industry includes owners and operators of apparel retail, computer and electronic retail, home improvement retail, specialty stores, automotive retail, and home furnishing retail. 2014 retail sales picked up during the holiday season as consumers experienced wage increases and the lowest gas prices in five years. Retailers experienced a 5.5% increase in sales between Thanksgiving and Christmas in 2014.

Restaurant Overview

The Restaurants Industry consists of companies engaged in the operation of restaurants, diners, taverns, pubs, nightclubs, food cart vendors, food service contractors, and commercial food service equip-ment wholesaling. The industry benefitted from a growing economy in 2014, as it added 360,000 jobs over the year and witnessed a nominal sales increase of 3.8%.

PERFORMANCE 1 YEAR 3 YEAR 5 YEAR

Sector 17.74% 69.47% 128.83%

S&P 500 11.56% 48.82% 75.22%



Chipotle Mexican Grill Inc. (NYSE: CMG)

Analyst: David CalambasSector: Consumer DiscretionaryMarket Cap: $20.24BIndustry: Quick Service RestaurantsStock Type: Large GrowthHolding Return: 2.2%Morningstar Rating: ***

KEY STOCK STATISTICS 2010 2011 2012 2013 2014

INDUSTRY 2014

Total Return % 141.22 58.82 (11.93) 79.11 28.48 8.55

Return on Assets % 17.18 16.88 17.97 17.81 19.55 10.80

Return on Equity % 23.64 23.17 24.28 23.52 25.09 31.30

Net Margin % 9.75 9.47 10.18 10.19 10.84 9.50

Asset Turnover 1.76 1.78 1.77 1.75 1.80 1.37

Financial Leverage 1.38 1.36 1.34 1.31 1.27 1.59

Operating Margin % 15.68 15.45 16.69 16.57 17.30 15.0

Revenue Growth %(yoy)

20.91 23.62 20.34 17.70 27.80 9.95

Operating Income Growth % (yoy)

41.30 21.79 30.04 16.86 33.43 --

EPS Growth % 42.78 19.86 29.44 19.66 34.96 --

Current Ratio 3.30 3.18 2.93 3.34 3.58 1.23

VALUATION ANALYSIS 2010 2011 2012 2013 2014

P/E 37.70 50.00 34.00 51.00 48.50

P/B 8.10 10.10 7.40 10.80 10.50

P/S 3.70 4.70 3.50 5.20 5.20

P/FCF 23.30 26.10 22.50 31.50 31.60

Dividend Yield % -- -- -- -- --

Current Price Fair Value 52-Week Range$660.02 $650.00 $472.41-727.97As of 4/6/2014

Business Summary:Chipotle Mexican Grill, Inc., together with its subsidiaries, develops and operates fast-casual and fresh Mexican food restaurants. As of February 3, 2015, it operated approximately 1,780 restaurants. The company was founded in 1993 and is based in Denver, Colorado.

Investment Rationale/Risk: x The company’s strategy of using naturally raised and organic

products acquired from local ranchers and farmers provides more bargaining power over its suppliers than its competitors and thus it became a more appealing choice to the growing number of health conscious consumers

x Chipotle’s simple but customizable menu paired with its as-sembly line style of food preparation reduces training costs and still offers the customer a unique experience, while maintaining efficiency during peak hours

x The powerful brand Chipotle has cultivated is a highly valuable intangible asset that will be a contributing factor in the future suc-cess of its secondary concepts: ShopHouse and Pizzeria Locale

EARNINGS GROWTH ESTIMATE COMPANY INDUSTRY

Current year % 21.90 5.70

Next year % 19.90 15.80

Past 5 years % 26.34 --

Next 5 years % 21.34 14.32

PEERS RETURN % 2014 ROE%

McDonald’s Corp (MCD) (0.05) 32.97

Starbucks Corp (SBUX) 6.07 42.41

Yum Brands Inc. (YUM) (1.64) 56.61



Lowe’s Companies Inc. (NYSE: LOW)

Analyst: Lisa RobbinsSector: Consumer DiscretionaryMarket Cap: $72.2BIndustry: Home Improvement StoresStock Type: Large GrowthHolding Return: 180.5%Morningstar Rating: ***


INDUSTRY 2014

Total Return %8.94 3.19 42.32 39.5 40.50 30.87

Return on Assets % 5.43 6.03 5.91 6.67 7.50 5.35

Return on Equity % 9.61 10.81 10.62 16.89 17.78 14.47

Net Margin % 3.78 4.12 3.66 4.30 4.28 4.15

Asset Turnover 1.44 1.46 1.49 1.55 1.63 1.18

Financial Leverage 1.73 1.86 2.03 2.69 2.76 --


Revenue Growth %(yoy) (2.09) 3.38 2.85 3.32 5.73 2.64


(17.80) 14.40 (7.95) -- 16.54 --

EPS Growth % (18.79) 17.36 0.00 25.25 26.63 13.52

Current Ratio 1.32 1.40 1.27 1.21 1.16 1.54

Valuation Analysis 2010 2011 2012 2013 2014

P/E 18.6 18.4 21.1 23.6 27.2

P/B 1.8 1.9 2.8 3.9 6.2

P/S 0.7 0.7 0.8 1.0 1.3

P/FCF 10.2 8.5 10.6 13.0 14.0

Dividend Yield % 1.59 1.97 1.69 1.50 1.19

Current Price Fair Value 52-Week Range$75.06 $85.00 $44.13 - $76.25As of 4/6/2015

Business Summary:Lowe’s Companies, Inc. is the second largest home-improvement retailer in the world with over 1,835 home improvement and hard-ware stores in the United States, Canada, and Mexico. Lowe’s offers products for maintenance, repair, remodeling, and home decorating, along with installation services through independent contractors. The company has a superior distribution network and a cutting edge logistics system that allows them to make large-scale purchase orders at a discount.

Investment Rationale/Risk: x Continued expansion into Canada, Mexico, and Australia will

allow them to diversify risk from their concentration in the U.S. market

x Lowe’s stock price was up 40% in 2014, benefiting from a housing market rebound and increased sales to professional contractors

x Increased appliance sales allowed Lowe’s to take market share from Sears Holding Corporation

x Has narrowed the sales growth gap against its leading competitor Home Depot in 2014



Next year % 19.00 20.90

Past 5 years % 17.84 --

Next 5 years % 18.20 12.70


Home Depot (HD) 29.77 35.55

Kingfisher PLC (KGFHY) (13.82) 11.37

Nitori Holdings Co., Ltd. (NCLTF)

29.03 16.79



VF Corp. (NYSE: VFC)

Analyst: Lisa RobbinsSector: Consumer DiscretionaryMarket Cap: $32.7BIndustry: Apparel ManufacturingStock Type: Large GrowthHolding Return: 9.5%Morningstar Rating: ***


INDUSTRY 2014

Total Return % 20.99 50.38 21.27 67.60 21.92 10.80

Return on Assets % 8.84 11.26 11.46 12.13 10.32 10.63

Return on Equity % 14.89 21.18 22.50 21.60 17.89 16.09

Net Margin % 7.42 9.39 9.98 10.60 8.53 8.67

Asset Turnover 1.19 1.20 1.15 1.14 1.21 0.90




6.68 0.81 15.02 4.96 7.55 10.33

Operating Income Growth %(yoy)

11.41 51.64 17.71 12.41 (12.71) --

EPS Growth % 25.42 54.05 21.55 11.75 (12.18)

Current Ratio 2.55 1.91 1.99 2.48 2.58 1.77


P/E 16.6 15.9 15.6 23.0 31.4

P/B 2.4 3.1 3.2 4.5 5.7

P/S 12.0 1.5 1.6 2.4 2.7

P/FCF 9.5 13.1 13.2 18.5 19.4

Dividend Yield % 2.82 2.06 2.01 1.47 1.48

Current Price Fair Value 52-Week Range$75.79 $85.00 $57.57 - $77.83As of 4/6/2015

Business Summary:VF Corp is a global leader in the design, manufacture, marketing, and distribution of branded lifestyle apparel, footwear, and accessories. They own a large portfolio of 30 leading lifestyle brands, such as The North Face, Timberland, Vans, Lee, and Wrangler. VF Corp operates 5 coalitions of brands including Outdoor & Action Sports, Jeanswear, Imagewear, Sportswear, and Contemporary brands that all drive above market returns. The company has a broad supply chain with 30% of their products produced in 32 internal manufacturing facilities and 70% sourced across an array of countries. VF Corp’s supply chain has a global reach and enormous scale that provides them with a diversified supplier network and maintains significant bargaining power with their suppliers, which allows them to keep costs low.

Investment Rationale/Risk: x VFC frequently reviews their brand portfolio which shields inves-

tors from declining brands or those that are no longer synergistic to other companies

x Intense consumer research is conducted before acquiring a company, which should lead to a stronger brand portfolio and price positioning

x The company maintains an aggressive growth strategy that includes the opening of 150 stores and expansion of their ecom-merce business



Next year % 15.60 11.20

Past 5 years % 18.04 --

Next 5 years % 11.07 14.8


Columbia Sportswear Company (COLM 14.57 10.60

The Gap, Inc. (GPS) 9.95 42.98

Hanesbrands Inc (HBI) 60.55 30.91



Underweight Consumer Staples Sector

Sector Overview

The Consumer Staples sector consists of companies that produce goods and services that are essential to consumers’ daily lives. This non-cyclical sector performs well in both bull and bear markets. Although products sold in this sector are essential for consumers, the market remains extremely competitive. Companies change their products with differentiation of costs and quality. The Consumer Staples sector has low demand elasticity, which provides the sector an ability to perform well during ups and downs in the economy.

Beverages Overview

This Beverages Industry includes Brewers, Distillers and Vintners, and Soft Drinks. The IMP portfolio holds 70 shares of the Coca-Cola Company (KO) within the Soft Drink industry, with a holding period return of 93.5%. Recently, the consumption of soft drinks has decreased due to an increased demand for healthier products. This negatively affects the soft drink industry because a large amount of its revenue is generated from the sale of carbonated soft drinks, such as soda. This trend is expected to continue due to an increasing aware-ness and prevention of obesity in the United States.

Household Products Overview

The Household Products Industry includes producers of non-durable household goods including detergents, soaps, diapers, and other paper products, not classified in the Paper Products Industry. The IMP Portfolio holds 20 shares of Proctor & Gamble (PG), with a holding period return of 47.3%. This industry is considered safe and stable because of its inelastic demand. Large companies such as Clorox, Colgate Palmolive, and Proctor & Gamble dominate this industry. Demand in this industry should remain stable, with larger companies dominating the industry.


Sector 15.51% 44.95% 75.87%

S&P 500 11.56% 48.82% 75.22%



Coca-Cola Co. (NYSE: KO)

Analyst: Leah JohnsonSector: Consumer GoodsMarket Cap: $32.7BIndustry: Beverages – Soft DrinksStock Type: Large ValueHolding Return: 93.5%Morningstar Rating: ****


INDUSTRY 2014

Total Return % 18.47 9.24 6.53 17.05 5.16 8.52

Return on Assets % 19.42 11.21 10.86 9.74 3.04 3.28

Return on Equity % 42.32 27.37 28.00 26.03 22.36 7.36

Net Margin % 33.63 18.42 18.78 18.32 15.43 3.40

Asset Turnover 0.58 0.61 0.58 0.53 0.51 1.07




13.32 32.53 3.17 (2.42) (1.83) 2.07


2.65 20.18 6.16 (5.11) (5.08) --

EPS Growth % 72.70 (27.08) 6.78 (3.55) (15.79) --

Current Ratio 1.17 1.05 1.09 1.13 1.02 1.33


P/E 13.0 19.0 18.4 21.7 26.5

P/B 4.9 5.0 4.9 5.5 6.1

P/S 4.4 3.5 3.5 4.0 4.1

P/FCF 16.1 17.2 15.6 17.7 17.7

Dividend Yield % 2.68 2.69 2.81 2.71 2.89


Business Summary:Coca-Cola is the world’s largest nonalcoholic beverage company. The company sells a wide variety of products including sparkling and still beverages. The company’s core brand names are Coca-Cola, Sprite, Dasani, Powerade, and Minute Maid. In addition to its drinks, the company licenses technologies and trademarks to suppliers and third parties. Coca-Cola currently owns 80% of its distribution in North America. The company generates 60% of their revenue and 80% of their operating profit from foreign sales.

Investment Rationale/Risk: x Coca-Cola has a wide economic moat from the company’s

popular brand name

x The company’s non-beverage portfolio has strong growth potential

x Company plans to streamline operations and improve profitability and returns on invested capital by shedding its North American distribution assets

x High amounts of foreign sales can present a risk if the value of the U.S. dollar continues to strengthen


Current year % (2.90) 16.6

Next year % 7.10 16.4

Past 5 years % 5.05 --

Next 5 years % 4.87 14.19

PEERS RETURN %2014 ROE%

PepsiCo Inc (PEP) 17.06 30.98

Monster Beverage Corp (MNST) 59.88 38.54

Dr. Pepper Snapple Group Inc. (DPS) 50.49 30.76



Proctor & Gamble (NYSE: PG)

Analyst: Leah JohnsonSector: Consumer GoodsMarket Cap: $223.5BIndustry: Personal ProductsStock Type: Large CoreHolding Return: 47.3%Morningstar Rating: ****


INDUSTRY 2014

Total Return % 9.21 6.90 5.08 23.40 15.00 7.1

Return on Assets % 9.52 8.68 7.76 8.15 8.03 6.32

Return on Equity % 20.59 18.32 16.32 17.14 16.87 7.15

Net Margin % 15.86 14.01 12.55 13.15 13.71 10.03

Asset Turnover 0.6 0.62 0.62 0.62 0.59 0.54




(0.12) 4.59 1.36 0.58 (1.31) 14.23


(0.63) (1.27) (15.97) 8.95 5.57 --

EPS Growth % (3.52) (4.38) (6.87) 5.46 3.89 -

Current Ratio 0.77 0.81 0.88 0.80 0.94 0.96


P/E 17.9 20.1 17.8 22.4 24.2

P/B 2.9 2.9 2.8 3.2 3.9

P/S 2.5 2.3 2.4 2.8 3.2

P/FCF 14.5 14.8 13.8 17.5 16.8

Dividend Yield % 2.93 3.08 3.26 2.91 2.78


Business Summary:Proctor & Gamble is the world’s largest consumer product manu-facturer. The company operates under five segments which include Beauty, Grooming, Health Care, Fabric Care and Home Care, Baby, Feminine, and Family Care. P&G sold their last food brand, Pringles, to Kellogg in 2012. The company owns many leading brands such as Tide laundry detergent, Charmin toilet paper, Pantene shampoo, and Cover Girl cosmetics. Twenty-three of the company’s brands gener-ate more than $1 billion in international sales. P&G markets their products through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons, high-frequency stores, and e-commerce. The firm has more than 60% of its sales from outside of the U.S., 40% of which come from emerging markets.

Investment Rationale/Risk: x P&G announced in August 2014 that the company would shed

more than half of its brand portfolio in an attempt to speed its growth

x The company is narrowing its focus to 70-80% of its brands as it looks to shed about 100 brands that have inferior performance

x P&G projects a drop in net sales due to the strengthening of the U.S. dollar and its effect on foreign sales



Next year % 7.3 12.2


Next 5 years % 6.67 14.31


Unilever NV ADR (UN) 0.79 36.94

L’Oreal SA (LRLCF) (1.26) 12.93

Estee Lauder Cos Inc Class A (EL) 2.28 29.52



Underweight Energy Sector

Sector Overview

The Energy sector is composed of companies that produce and distribute energy and energy products. Energy companies engage themselves in activities such as manufacturing, exploration, trans-portation and the refining of oil, gas, coal and other fuels. Some of these companies develop equipment for aid in the production and exploration of these energy resources.

Over the year, the Energy sector has performed poorly compared to the S&P 500. The notable impact on the Energy sector has been the influence of oil on global markets. While supply has increased in the United States and Middle Eastern countries, the demand growth is slowing down. Also in the past 12 months, analysts have shown a negative EPS growth, but a positive ROE and Free Cash Flow of over 15%. One reason attributing to the low Energy sector performance is the strength of the U.S. dollar. Historically, a strong dollar shows a negative trend in commodity prices. In addition, fuel efficiency in the U.S. seems to cut the demand growth in energy.

Looking ahead, the Energy sector has potential to increase demand. With global economies beginning to stabilize, investors will soon see nations trying to improve their infrastructure and create more modernized economies. In the process of improvements, these nations will need more energy to make their economies grow.

The IMP portfolio expanded into two industries in 2014, as the class saw several growth opportunities. Kinder Morgan, Inc. generated a total return of 14.8% in 2014. The Oil and Gas Midstream Industry provided strong numbers for the sector. However, ExxonMobil per-formed poorly with a total return of -8.6%. This return reflected the performance of the energy sector as a whole.

Oil and Gas Integrated Overview

The Oil and Gas Integrated industry focuses on companies who engage in exploration, production, refinement, and distribution of oil and gas. These companies, like ExxonMobil, divide these op-erations into categories of upstream, midstream, and downstream. Upstream operations include exploration and production of oil and gases. Midstream focuses on the transportation, storage, processing, and marketing of oil, natural gas and gas liquids. Lastly, downstream involves the refinement of crude oil and dispensing these by-products to retail. The integrated parts of energy companies help them to become large cap stocks. The IMP class views this industry as a great investment opportunity due to their competitive advantage of integrated operations.

Over the year, this industry performed poorly compared to the S&P 500 index. With the large supply of resources and low demand, the prices of energy commodities decreased causing the industry to de-cline. ExxonMobil was able to outperform the Oil and Gas Integrated industry, which helped its position in the IMP portfolio. To date, it has cut the loss from -11.08% to a -4.88%.

Oil and Gas Midstream Overview

Securities in the Midstream industry are challenged in order to com-pete with the integrated industry. This industry outperformed the S&P 500 index with a 14.26% return for 2014. IMP’s only security in this industry, Kinder Morgan, Inc., was successfully able to acquire subsidiaries throughout 2014, expanding its company under one name, which ultimately lead to growth in the IMP portfolio.


Sector (12.38)% 9.29% 29.99%

S&P 500 11.56% 48.82% 75.22%



Exxon Mobil Corporation (NYSE: XOM)

Analyst: Spencer HainesSector: EnergyMarket Cap: $356.5BIndustry: Oil & Gas IntegratedStock Type: Large ValueHolding Return: 9.7%Morningstar Rating: ****

KEY STOCK STATISTICS 2010 2011 2012 2013 2014 INDUSTRY

2014

Total Return % 9.78 18.45 4.68 19.77 (5.98) (11.08)

Return on Assets % 11.37 12.96 13.50 9.57 9.34 3.67

Return on Equity % 23.67 27.26 28.03 19.17 18.67 9.69

Net Margin % 7.95 8.44 9.31 7.43 7.89 (1.04)

Asset Turnover 1.43 1.54 1.45 1.29 1.18 1.09




23.39 26.93 (0.85) (9.13) (6.00) --


52.28 38.33 7.47 (26.69) (10.54) --

EPS Growth % 56.28 35.37 15.20 (24.02) 3.12 --

Current Ratio 0.94 0.94 1.01 0.83 0.82 0.76


P/E 11.8 10.1 8.9 13.7 12.2

P/B 2.5 2.6 2.3 2.5 2.2

P/S 0.9 0.8 0.8 1.0 1.0

P/FCF 7.4 7.5 7.1 10.0 8.8

Dividend Yield % 2.38 2.18 2.52 2.43 2.92


Business Summary:Exxon Mobil Corp is a leader in the energy industry engaged in ex-ploration for crude oil, natural gas, and coal. They also manufacture petroleum products and petrochemicals, such as olefins, aromatics, and polyethylene. ExxonMobil operates in North America, Europe, Africa, Asia, and Australia. The company has interest in providing energy resources, and expanding into new areas, such as electric power generation. Its three key operations in Upstream, Downstream, and Chemical, diversify their efforts in the energy sector.

Investment Rationale/Risk: x Exxon has a strong ability to generate free cash flow, improve its

refining margins, and expand its dividend growth

x High Exposure to drops in prices of crude oil and other materials are correlated to the downturns in economic output

x ExxonMobil is a stable long term, large growth company, provid-ing jobs and energy resources to vast areas of the United States and other foreign countries


Current year % (48.40) (43.50)

Next year % 41.30 23.20


Next 5 years % (1.15) 11.19


Chevron Corporation (CVX) (6.82) 12.65

Royal Dutch Shell PLC ADR Class A (RDS.A) (0.84) 8.45

BP PLC ADR (BP) (16.77) 3.14



Kinder Morgan, Inc. (NYSE: KMI)

Analyst: Spencer HainesSector: EnergyMarket Cap: $89.6BIndustry: Oil & Gas MidstreamStock Type: Large GrowthHolding Return: 15.4%Morningstar Rating: ***


2014

Total Return % -- -- 13.99 6.31 22.25 14.26

Return on Assets % (0.15) 1.99 0.64 1.66 1.30 3.91

Return on Equity % (1.09) 17.59 3.67 8.85 4.35 (51.47)

Net Margin % (0.50) 7.19 3.16 8.48 6.32 19.17

Asset Turnover 0.29 0.28 0.20 0.20 0.20 0.21




13.99 0.91 20.67 41.08 15.32 15.79


(8.99) 20.15 68.52 53.88 11.48 --

EPS Growth % -- -- (45.95) 187.50 (22.61) --

Current Ratio 0.49 0.37 0.71 0.64 0.59 0.74


P/E -- 38.8 43.9 31.3 47.6

P/B -- 13.0 2.6 2.8 2.6

P/S -- 2.8 4.8 2.7 3.0

P/FCF -- 9.6 17.1 9.2 10.8

Dividend Yield % -- 2.3 3.79 4.33 4.02


Business Summary:Kinder Morgan, Inc. is a North America-based company operating in energy and energy infrastructure. Its operating segments include Natural Gas pipelines, CO2, Terminals, and Product Pipelines. Within the various segments, Kinder Morgan, Inc. specifically operates in natural gas liquid fractionation facilities, transportation systems, oil-producing fields, and gas processing plants, and produc-tion of crude oil and petroleum products. They have an investment of 180 terminals with approximately 80,000 miles of pipelines installed in North America. Recently, Kinder Morgan, Inc. engaged in the acquisition of Hiland Partners expanding their operations of oil and natural gas gathering, pipeline transportation, and processing systems in the Bakken Shale Oilfields.

Investment Rationale/Risk: x The company is financially strong with low debt even after the

recent mergers and acquisitions of Hiland Partners and the purchasing of Kinder Morgan Energy Partners, Kinder Morgan Management, LLC, and El Paso Pipeline Partners, L.P

x A large part of KMI’s cash flows are influenced by the oil prices

x The management of the company is under distress as the cur-rent CEO Richard Kinder stepped down and was replaced by Steve Kean


Current year % (16.80) (43.50)

Next year % 14.60 23.20


Next 5 years % 4.20 11.19


Enterprise Products Partners L.P. (EPD) 13.27 16.75

Williams Companies, INC. (WMB) 21.59 30.99

TransCanada Corp. (TRP) 11.31 10.40



Underweight Financial Sector

Sector Overview

The financial sector is composed of companies which provide eco-nomic products and services for a broad range of customers. These companies are involved in activities such as consumer finance, bank-ing, mortgage finance, specialized finance, investment banking and brokerage, asset management, corporate lending, insurance, financial investment, real estate management and development, and REITs. In 2014, the financial sector held a 16.07% weight in the S&P 500 compared to 8.26% in the IMP portfolio. This weight allocation is predominantly attributed to the fact that the financial sector is a cyclical sector, meaning that the sector shifts with the market.

Most recently, the financial sector has been experiencing major gains as a reflection of major activity in the market. Highlighted trends in the market this year include job growth, recovery in industrial pro-duction, housing market recovery and growth, low inflation, declin-ing oil prices, wage growth, and increased consumer spending. Real GDP growth gained 4.6% in the second-quarter of 2014, which is the largest growth since the fourth-quarter of 2011. In mid-October U.S. stock prices fell sharply, but have somewhat recovered since. Skepticism concerning the condition of the global economy continues to increase as weaker numbers continue to emerge from Europe and geopolitical conflict escalates.

A major factor that affects the financial sector is interest rates. As the market anticipates rate hikes from the Fed in the coming year (2015), prices have become more volatile because of investor uncertainty. Falling oil prices and the potential for slower inflation have weighed on long-term interest rates heavily this past year, with the yield on the 10-year Treasury falling below 2.0% late in 2014. An increase in interest rates will affect the majority of the financial sector in a negative way as it will decrease profits.

Banking Overview

The Banking Industry has continually evolved due to deregulation and technology. Banks now encompass a global presence and have more complex products, services, and risks. The banking industry is increasingly more dependent on technology as ATMs, online bank-ing, and electronic payment exchanges continue to grow. The banking industry is heavily impacted by interest rates, as they affect the interest rate spread, and net interest income of banks. Specifically, spread is the difference between investment interest rates and lending interest rates. Because interest rates have been historically low, it is assumed that the industry’s performance has been poor. However, due to posi-tive factors such as increased consumer spending and borrowing and lower unemployment, the industry has continued to perform relatively well.

Diversified Financial Services Overview

Diversified Financial Services is the largest industry within the financial sector. The services provided by companies in the industry include banking, insurance and capital markets; but, the industry has no dominant business line. This industry also includes Multi-Sector

Holdings companies with significantly diversified holdings across three or more sectors; none of which contributes to a majority of profit or sales. Specialized Finance providers, also included in the industry, provide credit agency, stock exchange, and specialty boutique services. Companies are increasingly able to exploit many different lines of business as the financial system continues to deregulate. The positive gains in the Diversified Financial Services sector are attributed to the vast selection of products and services as well as the cyclical nature of the financial sector.

Real Estate Investment Trusts Overview

The Real Estate Investment Trusts (REITs) industry includes com-panies or trusts engaged in Industrial, Mortgage, Office, Residential, Retail or Specialized REITs, all of which trade on major exchanges. REITs are attractive to investors due to special tax considerations and their high yield. REITs are also attractive as they are a highly liquid way to invest in real estate. The REIT mandate requires that at least 90% of income be distributed to shareholders through divi-dends. REITs offer expanded investment opportunities for investors seeking dividend income and modest long-term growth. Over the past several years, the REITs industry has tended to outperform the S&P 500 on a total return basis. REITs historically kept pace with, or exceeded the market’s performance with the additional benefits of higher returns, less market price volatility, and modest correlation with stocks. Over the past decade, REITs have boasted dividend growth rates, outpacing inflation. Lower correlation of REITs versus other stocks also provides diversification benefits for investors. We expect that our holding, American Tower Corporation, will continue to grow in the coming year. REITs are not so interest-rate sensitive in com-parison with other investment vehicles and it is unlikely that AMT will be strongly affected by anticipation and/or change in interest rates in 2015. Because REITs strongly react with economic growth, current favorable conditions such as job growth, dollar strength, and increased consumer spending will ensure growth for both the economy and REITs. After a solid run in 2014, values remain reasonable and fundamentals are strong for REITs for 2015.


Sector 9.30% 56.11% 49.17%

S&P 500 11.56% 48.82% 75.22%



Analyst: Marie Smith Sector: Real Estate Market Cap: $38.4BIndustry: REIT-Diversified Stock Type: Large growth Holding Return: -3.10%Morningstar Rating: ****


INDUSTRY 2014

Total Return % 19.51 16.89 30.26 4.72 25.60 6.07

Return on Assets % 3.95 3.51 4.84 3.21 3.85 3.93

Return on Equity % 10.94 11.68 18.58 15.51 21.40 6.39

Net Margin % 18.78 16.23 22.15 16.40 19.54 31.40

Asset Turnover 0.21 0.22 0.22 0.20 0.20 0.18




15.15 23.08 17.70 16.88 21.97 --


16.68 17.31 21.69 8.45 22.45 --

EPS Growth % 50.82 7.61 61.62 (13.75) 44.93 3.20

Current Ratio 2.59 1.08 1.31 1.03 0.49 --


P/E 56.2 60.6 48.3 57.8 49.3

P/B 5.9 7.2 8.5 8.9 9.9

P/S 10.5 9.8 10.7 9.5 9.6

P/FCF 20.4 20.6 21.8 19.9 18.5

Dividend Yield % -- 0.58 1.16 1.38 1.42

American Tower Corp. (NYSE: AMT)

Current Price Fair Value 52-Week Range$96.04 $111.00 $80.10-106.31 As of 4/6/2015

Business Summary:American Tower Corporation (AMT) is a real estate investment trust. American Tower Corp was founded in 1995 and is headquartered in Boston, Massachusetts. AMT invests in the global real estate market and is the largest independent operator of wireless and broadcast communication sites. Through its subsidiaries, AMT owns, operates, and develops wireless and broadcast communications real estate. In addition, the company leases an-tenna space on multi-tenant communication sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities, and tenants in a number of different industries.

Investment Rationale/Risk: x AMT has more than half of its communication sites in international

markets

x Increased diversification boosts AMT growth profile while improving prospects for expanding returns on invested capital

x REIT structure allows the firm to pay its taxes more efficiently without compromising its growth prospects

x AMT has the longest running contracts in the sector, providing an ad-vantage for visibility and less operating volatility

x Risk associated with foreign market exposure and expansions, adding foreign exchange risk and regulatory uncertainty

x The top four U.S. carriers account for over half of AMT’s tower revenue. A major disruption to just one of these carriers may cause drastic profit loss

x Temporarily suspended stock repurchases



Next year % 12.90 19.60

Past 5 years % 18.80 --

Next 5 years % 12.65 18.50

PEERS Return % 2014 ROE%

SBA Communications Corp. (SBAC) 23.29 (11.07)

CCI- Crown Castle International Corp. 9.72 5.08

Pvt1- LLC International- Privately held -- --



Discover Financial Services (NYSE: DFS)

Analyst: Marie Smith Sector: FinancialsMarket Cap: $25.3BIndustry: Credit Services Stock Type: Large Value Holding Return: 161.9%Morningstar Rating: ****


INDUSTRY 2014

Total Return % 26.51 31.03 62.46 46.69 18.70 8.62

Return on Assets % 1.25 3.40 3.22 3.04 2.79 1.7

Return on Equity % 10.3 30.3 26.0 24.7 21.80 13.7

Net Margin % 10.03 31.16 30.29 29.35 26.78 25.4

Asset Turnover 0.12 0.11 0.11 0.10 0.10 0.10




(1.13) 6.12 8.31 6.86 3.08 0.19


(40.17) 176.72 6.89 4.68 (6.34) --

EPS Growth % (48.90) 232.79 9.85 10.29 (1.21) 0.95

Current Ratio 1.4 1.4 1.3 1.5 1.5 3.3


P/E 15.2 5.9 8.7 11.3 13.4

P/B 1.6 1.5 2.1 2.6 2.8

P/S 1.5 1.8 2.6 3.3 3.6

P/FCF 2.6 3.6 6.6 7.7 7.9

Dividend Yield % 0.43 1.17 1.0 1.4 1.67


Business Summary:Discover Financial Services operates one of the two closed-loop credit card networks in the United States, with American Express operating the other. Discover issues proprietary cards, extends card loans to cardholders, and acquires transactions from merchants when a cardholder makes a payment using a Discover card.

Investment Rationale/Risk: x Strong returns and increasing dividend yield

x Better-tailored student loans than competitors

x Aggressive growth strategy that includes the opening of 150 stores and expansion of their ecommerce business

x Increasing pressure to compete in reward space for cardholders remains challenging



Next year % (0.70) 24.60

Past 5 years % 20.99 --

Next 5 years % 8.85 11.76


American Express (AXP) 3.63 23.61

Visa (V) 18.50 20.4

Capital One Financial (COF) 9.32 10.0



Toronto-Dominion Bank (NYSE: TD)

Analyst: Marie Smith Sector: Financial Services Market Cap: $79.6BIndustry: Banks-Global Stock Type: Large Core Holding Return: 14.8%Morningstar Rating: ***


INDUSTRY2014

Total Return % 22.25 4.21 16.59 11.10 4.99 0.71

Return on Assets % 0.76 0.87 0.82 0.76 0.84 0.5

Return on Equity % 11.99 13.86 14.09 13.97 15.33 6.6

Net Margin % 22.74 26.44 26.69 23.37 25.48 14.1

Asset Turnover 0.03 0.03 0.03 0.03 0.03 --




9.55 10.37 7.08 17.91 9.90 (1.9)


5.33 16.89 32.24 9.25 8.80 --

EPS Growth % 46.97 25.69 5.46 2.22 19.83 9.94

Current Ratio -- -- -- -- -- --


P/E 14.6 11.9 12.4 14.5 13.4

P/B 2.1 1.8 1.8 1.9 1.9

P/S 3.3 3.1 3.3 3.4 3.4

P/FCF 20.00 (89.3) 5.5 2.9 3.9

Dividend Yield % 3.16 3.59 3.44 3.36 3.48


Business Summary:Toronto-Dominion (TD) Bank and its subsidiaries provide Canadian Personal and Commercial Banking, U.S. Personal and Commercial Banking, Wealth Management, Insurance, and Wholesale Banking. TD is the second largest bank in Canada, where six major banks hold 90% of all bank deposits. This oligopoly is sustained by Canadian law and government, which limits foreign competition in the market and allows TD to price services above perfect competition levels.

Investment Rationale/Risk: x Concerns for growing risk related to the Canadian economy

x Canadian housing bubble, household debt above 160%, slowing retail growth, weakening Canadian dollar, large investments in Canadian oil-based companies, and underwhelming results from U.S. expansions lead to re-evaluation of this holding

x Continues to keep pace with growth in revenues



Next year % 7.10 12.30


Next 5 years % 12.00 10.23


Bank of Montreal (BMO) 10.28 14.40

The Bank of Nova Scotia (BNS) (4.99) 16.17

Royal Bank of Canada (RY) 6.56 18.79



Wells Fargo & Co (NYSE: WFC)

Analyst: Marie Smith Sector: Financial Services Market Cap: $280.1BIndustry: Banks-Global Stock Type: Large value Holding Return: 11.6%Morningstar Rating: ***


2014

Total Return % 15.56 (9.52) 27.21 36.19 23.72 0.71

Return on Assets % 0.93 1.17 1.32 1.42 1.36 0.50

Return on Equity % 10.53 12.19 13.16 13.99 13.68 6.6

Net Margin % 13.65 18.56 20.91 24.93 25.87 14.1

Asset Turnover 0.07 0.06 0.06 0.06 0.05 --




(3.92) (5.00) 6.35 (2.68) 0.68 (1.9)


5.57 24.50 20.35 14.60 3.94 --

EPS Growth % 26.29 27.60 19.15 15.77 5.40 9.94

Current Ratio -- -- -- -- -- --


P/E 14.0 9.8 10.2 11.7 13.4

P/B 1.4 1.1 1.2 1.6 1.7

P/S 1.9 1.8 2.1 2.9 3.5

P/FCF 8.7 10.7 3.1 4.2 16.6

Dividend Yield % 0.65 1.74 2.57 2.53 2.46


Business Summary:Wells Fargo & Co (WFC) is a diversified financial services company. WFC provides retail, corporate, and commercial banking services through banking stores and offices, the internet, and other distribution channels to individuals, businesses and institutions. WFC demonstrates almost unmatchable profitability compared to peers on a global basis.

Investment Rationale/Risk: x WFC 2014 performance results are in line with expectations;

58% efficiency ratio

x Challenging macroeconomic and regulatory environment will challenge potential for balance sheet and profitability growth in coming quarters

x Credit quality remains exceptional in comparison with industry due to conservative underwriting, tightened post-crisis lending standards, and the improving U.S. economy

x Losses in commercial and industrial loans will increase as energy prices continue to weaken

x Added more than $4 billion in credit card loans during 2014 due to expansion of private-label business

x Large structure advantage in industry; largest deposit gatherer in global metropolitan markets



Next year % 9.60 12.30

Past 5 years % 29.14 --

Next 5 years % 9.70 10.23


Bank of America Corporation (BAC) 15.67 1.71

Citigroup (C) 3.91 3.68

JPMorgan Chase & Co (JPM) 9.68 9.75



Overweight Health Care Sector

Sector Overview

During an extremely volatile market or anywhere along the business cycle, Health Care is one of the top and most consistent performers. Health Care has outperformed the S&P 500 handily over the past four years, and is currently on pace to outperform in 2015 as well. Health Care is credited for about 1 million of the 7.7 million jobs created since The Affordable Care Act (ACA) was signed into law in 2010. Since 2013, Health Care has created an average of 23,000 jobs per year, with 119 straight months of job growth, hovering between 2-3% a year since 2003. Spending, however, has decreased (from over 7% in 2003 to just over 4% in 2013). The Office of the Actuary projects a 6% growth in the Health Care industry from 2015-2023, and a rise in GDP of 17.2% to 19.3% for the same period. Health Care will remain the most inelastic industry. Growth in emerging markets, aging baby boomers, incredible new drug technology for the most complicated and deadly of maladies, and the rapid technology changes in the United States still make it the strongest and most stable sector for investment. The highlights going forward are focusing on cost control, preventative care, efficient mergers and acquisitions, and quick and responsive data innovations to create a more efficient health care network.

Pharmaceuticals Overview

Pharmaceutical companies offer widely diversified products, but struggle with the price of innovation and competition from generic drug firms. Pharmaceutical companies have high profit margins and pricing power, which helps increase their gross margins up to 80%. As emerging markets grow, patent losses from these firms are going to be offset. They depend heavily on patents. The average cost of releasing a new drug is $800 million and drugs that lose their patent also lose 80% of their sales in the following six months. However, these companies have begun to understand the importance of finding their own niche, and major pharmaceutical companies have begun to spin off underperforming, or competitive arms (often generics). A major niche for this industry has proven to be high-cost treatments for deadly, complicated diseases. They are experiencing much com-petition from the biotechnology industry, as well as suffering from patent expirations.

Biotechnology Overview

Biotechnology firms are rapidly growing and are increasingly more innovative than the pharmaceutical firms in today’s market. Their focus is to find new drugs using the biology process, which is unlike the chemical process utilized by pharmaceutical firms. Research and development is focusing on diseases with unknown cures to date. Such diseases are a higher risk because these treat-ments and therapies have never been intro-duced to the market before, and consumers must adapt from being chemically reliant. Current roadblocks for this industry are the pricing wars which exist between insurance companies and pharmacy benefit managers to bid down these high-cost treatments.

Equipment and Supplies Overview

Health Care suppliers and equipment companies manufacture health related equipment, devices, supplies and medical products such as instruments, safety needles, syringes, cardiovascular devices, etc. Sales are very important to the companies trying to gain a competitive advantage over their competitors. This is true because of the limited barriers to entry, and continuous technological changes aimed to improve efficiency.

Provider and Services Overview

The health care providers and services industry includes hospitals, surgical centers, long-term care facilities, nursing, dialysis, and other providers of health care services. Services provided are every day medical services, rehabilitation, surgical procedures, and emergency care. This industry has a narrow economic moat and struggles with returns that are higher than the cost of capital. Most of the revenue generated comes from Medicare and Medicaid reimbursements. Hospital facilities have been hurt most by the ACA. Instead of ma-jor growth like the rest of the industry, jobs have been hemorrhaged from this industry.

Life Sciences Tools and Services Overview

Life Sciences Tools and Services are independent reference labs that have very narrow economic moats and focus on researching and de-veloping new drugs. They are the target of many acquisitions from diagnostic test manufacturers.

Information Technology Overview

The health care information technology industry provides health care services to companies in the provider industry. They create data processing systems, internet tools, and consulting services to doctors and hospitals. This is an incredibly profitable area as the entire sector is still converting to the digital age (ACA mandated by the end of 2015 for most industries).


Sector 24.04% 91.82% 122.98%

S&P 500 11.56% 48.82% 75.22%



Abbott Labs (NYSE: ABT)

Analyst: Michael KuderSector: Health CareMarket Cap: $69.6BIndustry: Medical DevicesStock Type: Slow GrowthHolding Return: 94.3%Morningstar Rating: ****


INDUSTRY 2014

Total Return % (8.08) 21.29 20.06 24.09 19.75 22.84

Return on Assets % 8.27 7.90 9.35 4.68 5.42 9.51

Return on Equity % 20.45 20.20 23.31 9.93 9.78 14.73

Net Margin % 13.16 12.17 14.95 11.79 11.28 8.74

Asset Turnover 0.63 0.65 0.63 0.40 0.48 0.86




14.31 10.48 2.63 (45.21) (7.33) 14.21


(2.38) (5.51) 40.55 (67.48) (1.14) --

EPS Growth % (19.78) 1.69 23.59 (56.45) (8.02) 23.32

Current Ratio 1.29 1.54 2.36 2.02 1.45 1.71


P/E 16.2 18.6 17.5 25.6 40.2

P/B 3.3 3.6 3.9 2.4 3.2

P/S 2.1 2.3 2.6 2.8 3.4

P/FCF 8.5 9.8 11.2 18.1 18.7

Dividend Yield % 3.59 3.34 3.07 1.46 1.95


Business Summary:Abbott Labs produces and markets medical devices, nutritional health-care products, and generic drugs, among other things. The company has benefitted from its strong position in the market for stents, where it is one of the leading companies. In coming years, the company will enjoy the growth of its nutritional business as emerging markets see a developing middle class. About 60% of the company’s sales originate from outside the United States, making the firm less dependent on one market’s success.

Investment Rationale/Risk: x Abbott is well positioned in the stent business, thanks to the

company’s record of safety and effectiveness with these products

x Abbott has strongly positioned itself in the branded generic business and is well positioned to benefit from emerging market growth

x Stiff competition is present in the diagnostic field; Roche is well developed here, and there are energetic startups giving competi-tion as well

x The overall weight on international sales makes the current ris-ing dollar a risk



Next year % 12.10 29.60

Past 5 years % (15.66) --

Next 5 years % 9.64 14.89


Stryker Corporation (SYK) 27.22 2.06

St Jude Medical Inc (STJ) 6.72 23.77

Medtronic PLC (MDT) 27.89 16.08



Amgen Inc. (NASDAQ: AMGN)

Analyst: John DicksonSector: Health CareMarket Cap: $118.3BIndustry: BiotechnologyStock Type: Large GrowthHolding Return: -1.6%Morningstar Rating: ****


2014

Total Return % (2.95) 17.98 36.49 34.52 41.77 29.93

Return on Assets % 11.13 7.98 8.42 8.44 7.63 12.58

Return on Equity % 19.85 17.14 22.82 24.69 21.55 17.42

Net Margin % 30.74 23.64 25.17 27.21 25.71 11.50

Asset Turnover 0.36 0.34 0.33 0.31 0.30 1.08




2.81 3.51 10.80 8.17 7.43 10.80


0.71 (22.24) 29.34 5.20 5.52 50.73

EPS Growth % 6.21 (15.66) 36.63 20.29 0.90 --

Current Ratio 3.52 4.80 3.81 3.44 4.95 2.65


P/E 11.5 15.9 15.6 17.2 23.8

P/B 2.1 2.7 3.4 3.9 4.7

P/S 3.5 3.8 3.9 4.7 6.1

P/FCF 9.2 11.4 11.5 13.9 14.3

Dividend Yield % -- 0.87 1.67 1.65 1.53

Current Price Fair Value 52-Week Range$155.88 $170.00 $108.20-$173.14As of 4/6/2015

Business Summary:Amgen Inc. (AMGN), incorporated on October 31, 1986, is a global biotechnology company that discovers, develops, manufactures and delivers human therapeutics. The company focuses its research and development activities on human therapeutics in the areas of oncology, hematology, inflammation, bone health, nephrology, cardiovascular and general medicine, which includes neuroscience.

Investment Rationale/Risk: x Dividend boost of 30%, with further increases planned; plans to resume

share repurchases of $2 billion; improve operating margin by 15%

x The company has received criticism for not achieving high returns on their acquisitions; however, they will focus future acquisitions on drugs in early stages

x Plans to launch more drugs in the next 3 years, more than the last 25 years combined

x Will launch 10 medicines by 2016 with four more awaiting approval, including a multibillion dollar cholesterol drug

x Plans to launch 9 biosimilars (less expensive biotech drugs, like generics) which is projected to be a $3 billion business

x Currently there is a huge pricing war amongst the insurance industry, pharmacy benefit managers, and biotech companies to decrease prices on biotech drugs; which will affect the future of both industries

x Next generation bio manufacturing will come in 2017 to cut costs

x The company projects $1.5 billion in cost savings by the year 2018 resulting from job cuts and other cost cutting measures

x Debt ratios are troubling, but cash flow is strong ($8 billion); PE is around 17 compared to 96 for the industry

EARNINGS GROWTH ESTIMATE

COMPANY INDUSTRY


Next year % 12.60 29.60

Past 5 years % 14.48 --

Next 5 years % 11.10 14.89


Roche Holding AG (RHHBY) (3.16) 43.61

Gilead Sciences (GILD) 25.51 90.32

Novo Nordisk A/S (NVO) 14.53 63.92



Cerner Corporation (NASDAQ: CERN)

Analyst: John DicksonSector: Health CareMarket Cap: $24.9BIndustry: Health Care Information TechnologyStock Type: Large ValueHolding Return: 11.1%Morningstar Rating: **


INDUSTRY 2014

Total Return % 14.92 29.30 26.55 43.83 16.00 7.66

Return on Assets % 10.38 11.31 11.85 10.21 12.18 3.75

Return on Equity % 13.61 14.55 15.44 13.28 15.61 11.10

Net Margin % 12.82 13.92 14.90 13.69 15.44 4.88

Asset Turnover 0.81 0.81 0.80 0.75 0.79 0.79




10.67 19.08 20.98 9.20 16.90 9.52


23.06 27.96 24.33 0.76 32.48 7.10

EPS Growth % 20.35 26.62 28.41 - 32.74 --

Current Ratio 3.75 3.42 3.09 2.75 3.70 2.15


P/E 34.1 34.7 34.2 49.3 43.1

P/B 4.1 4.5 4.7 6.0 6.2

P/S 1.3 1.2 1.3 1.7 1.8

P/FCF 9.3 8.5 9.2 11.2 11.5



Business Summary:Cerner Corp is a supplier of health care information technology and of-fers a range of software, professional services, medical device integration, remote hosting, and employer health and wellness services. Cerner designs and develops clinical and health management information systems as well as healthcare delivery systems. They create cloud-based systems and statistical algorithms that improve the overall healthcare delivery system. They also provide software that improves billing cycle management, which improves payment collection.

Investment Rationale/Risk: x Maintains strong corporate governance; CEO was a cofounder of the

company and most officers have been there for 15+ years

x Will benefit from the Affordable Care Act as it strives to clean up pa-perwork and transition to an efficient electronic system, which is exactly what Cerner does; the HITECH Act mandates by 2015 electronic recordkeeping for healthcare companies

x Cerner continues to innovate, with R&D making up 14.7% of sales; most recently partnered with Apple’s new iPhone 6 Health Kit and was 22nd on Forbe’s most innovative list; also partnering with VFW to improve IT systems

x Strong relationship with large hospital systems, with around 1,000 partners in this category; however they are also rolling out systems for elder care facilities

x They are currently experiencing strong international growth in the UK, Middle East, and Australia

x Very low debt with a history of cash only transactions

x Three Trails Campus, built to assist in the $1.3 billion cash purchase of Siemens Health Services; Siemens’ campus will add 16,000 jobs at a cost of $4.5 billion

x Siemens will create a synergy of 20,000 associates, 18,000 facilities, an additional $1.5 billion in revenue, along with $650 million in R&D investment, along with Siemens’ imaging expertise


Current year % 28.50 --

Next year % 19.30 86.50

Past 5 years % 22.40 --

Next 5 years % 21.50 14.94


AthenaHealth Inc. (ATHN) 8.33 (.72)

WebMD Health Corp (WBMD) 9.95 42.98

Veeva Systems Inc. (VEEV) 60.55 30.91



Gilead Sciences Inc (Nasdaq: GILD)

Analyst: Michael KuderSector: Health CareMarket Cap: $146.5BIndustry: BiotechnologyStock Type: Aggressive GrowthHolding Return: 25.4%Morningstar Rating: ****


INDUSTRY 2014

Total Return % (16.25) 12.94 79.45 104.49 25.51 29.93

Return on Assets % 27.25 19.41 13.45 14.06 42.34 12.58

Return on Equity % 47.44 44.49 32.30 29.74 90.32 17.42

Net Margin % 36.50 33.43 26.71 27.45 48.62 11.50

Asset Turnover 0.75 0.58 0.50 0.51 0.87 1.08



Revenue Growth % (yoy)

13.38 5.48 15.71 15.45 122.20 8.32


12.27 (4.35) 5.81 12.81 237.42 --

EPS Growth % 17.73 6.93 (7.61) 10.37 306.08 16.33

Current Ratio 2.32 5.53 1.44 1.15 3.07 2.65


P/E 10.9 11.5 22.4 41.3 12.8

P/B 5.0 4.6 6.0 10.1 9.2

P/S 4.0 3.9 6.0 11.4 6.2

P/FCF 11.2 8.9 18.2 41.0 12.1



Business Summary:Gilead Sciences is a leading producer of therapies to treat life threaten-ing infectious diseases. Its current products are focused around HIV and hepatitis B and C. The company has undergone acquisitions of several industry peers, which have expanded the company’s reach into pulmonary and cardiovascular diseases, as well as cancer. The companies acquisitions paired with its history of innovation should carry the firm into the future.

Investment Rationale/Risk: x Gilead markets three, once daily, treatments for HIV, which

greatly increase patient compliance and reduces risk of drug resistance

x Sovaldi and Harvoni’s approval will make Gilead the market leader in oral hepatitis C treatments; none of their competitors have similar products coming to market

x Increasing pricing pressure is coming to the market, which could impact Gilead’s bottom line moving forward

Earnings Growth Estimate Company Industry


Next year % 7.90 29.60

Past 5 years % 31.78 --

Next 5 years % 13.22 14.89


Roche Holding AG (RHHBF) 0.84 43.61

Amgen Inc (AMGN) 41.77 21.55

Celgene Corp (CELG) 32.40 33.02



Novartis AG ADR (NYSE: NVS)

Analyst: Chelsea ScomakSector: HealthcareMarket Cap: $240.50BIndustry: Drug Manufacturers-MajorStock Type: Large GrowthHolding Return: 75.40%Morningstar Rating: ***


INDUSTRY 2014

Total Return % 11.88 0.99 15.06 30.98 18.66 10.96

Return on Assets % 8.95 7.57 7.86 7.33 8.11 12.58

Return on Equity % 16.24 14.12 14.09 12.79 14.07 17.42

Net Margin % 19.00 15.35 16.51 15.60 19.04 11.50

Asset Turnover 0.47 0.49 0.48 0.47 0.43 1.08




14.32 15.15 (3.06) 2.21 (8.83) 10.80


15.47 (4.58) 4.66 (5.22) 1.64 (18.35)

EPS Growth % 15.45 (11.27) 2.91 (4.88) 11.62 --

Current Ratio 1.08 1.04 1.16 1.16 1.39 2.65


P/E 13.80 15.10 16.30 21.70 21.50

P/B 2.10 2.10 2.20 2.60 3.10

P/S 2.60 2.30 2.70 3.40 4.20

P/FCF 9.60 9.60 10.90 15.10 16.20

Dividend Yield % 3.31 4.13 3.92 3.15 2.93


Business Summary:Founded in Basel, Switzerland, Novartis AG researches, develops, manufactures, and markets healthcare products worldwide. In their Pharmaceuticals department, they offer many patented prescription medicines focusing on therapeutic areas ranging from oncology to neuroscience. Their Alcon section works primarily on eye care prod-ucts. With many drug innovations and other clinics in their pipeline, they are projecting a lot of growth in the coming years and promising change in the medical field.

Investment Rationale/Risk: x Novartis has a full clinical pipeline projecting into 2019

x Leading the industry in margins, revenue, and EPS growth, as well as beating many industry averages

Earnings Growth Estimate Company Industry

Current year % (0.40) -1.4

Next year % 6.50 29.60


Next 5 years % 8.20 15.17


Merck & Co Inc (MRK) 17.00 24.22

Pfizer Inc (PFE) 5.09 12.38

Bristol-Myers Squibb Company (BMY) 13.79 13.36



UnitedHealth Group Inc. (NYSE: UNH)

Analyst: John DicksonSector: Health CareMarket Cap: $111.9BIndustry: Health Care PlansStock Type: Large GrowthHolding Return: 72.8%Morningstar Rating: **


INDUSTRY 2014

Total Return % 19.80 42.05 8.60 40.77 36.12 31.70

Return on Assets % 7.59 7.85 7.43 6.91 6.68 5.97

Return on Equity % 18.75 19.00 18.58 17.76 17.40 14.82

Net Margin % 4.92 5.05 5.00 4.59 4.31 3.59

Asset Turnover 1.54 1.56 1.49 1.51 1.55 1.80




8.05 8.19 8.60 10.73 6.52 12.44


23.67 7.63 9.33 3.99 6.77 16.04

EPS Growth % 26.54 15.37 11.63 4.17 3.64 --

Current Ratio .78 .85 .78 .73 .77 .95


P/E 8.8 10.7 10.3 13.7 17.7

P/B 1.5 1.9 1.8 2.3 3.0

P/S 0.4 0.5 0.5 0.6 0.8

P/FCF 6.5 7.9 7.9 11.0 12.4

Dividend Yield % 1.1 1.2 1.5 1.4 1.3


Business Summary:UnitedHealth Group Inc. (UNH) operates as a diversified health and well-being company in the United States. The company’s United Healthcare seg-ment offers consumer-oriented health benefit plans and services to national employers, public sector employers, mid-sized employers, small businesses, and individuals; health and well-being services to individuals aged 50 and older. Their Optum segment operates as an incredibly profitable pharmacy benefit manager, which directly competes with major PBMs while also having their own insurance agency. This creates a profitable moat for UNH within the insurance industry.

Investment Rationale/Risk: x Overvalued: [Intrinsic Value < Current Price: 117.36>105.00]

x Strong financials ($110.6B Revenue), relatively low debt-equity (30%), and $6 billion in FCF allows great flexibility

x Maintains a competitive advantage with their new international seg-ment in Brazil

x Flattening growth rates (0% or less in 5 of the last 6 quarters) makes it so UNH has to continue to use mergers and aquisitions

x Benefit manager/Health IT arm Optum grew 28% in revenues, 23% in earnings, and provided 1/3 of UNH’s cash flows from operations, striking directly at competitor Express Scripts

x Stock price continues to make advances, most likely due to the unique moat that UNH offers having operations at two of the three links on the drug delivery system

x Identified as most ethical company by Forbes, but as the worst payer amongst providers by hospitals

x Faced a $300 million fine due to surpassing ACA’s 15-20% overhead restriction and a $170 million fine from California from a prior merger

x Consistently pays out good dividends

x Has added 635,000 to Medicaid and is very successful in ACA ex-changes; also has the largest Medicare and Medicaid books

EARNINGS GROWTH ESTIMATE

COMPANY INDUSTRY


Next year % 13.10 17.60


Next 5 years % 9.67 15.50


Anthem Inc. (ANTM) 36.02 10.49

Express Scripts (ESRX) 20.54 9.58

Aetna Inc. (AET) 29.51 14.32



Overweight Industrials Sector

Sector Overview

The Industrials Sector currently makes up 13.59% of the S&P 500 portfolio. In 2014 the sector was evenly split between industries that outperformed the S&P 500 and industries that underperformed. This was mainly due to global economic uncertainty and international exposure to downturns in foreign markets, low oil prices, and the rapid strengthening of the U.S. dollar. The $3.38 trillion Industrial Sector is diverse and comprised of numerous industries. The in-dustries within the sector are Aerospace & Defense, Air Freight & Logistics, Airlines, Building Products, Commercial Services & Sup-plies, Construction & Engineering, Electrical Equipment, Industrial Conglomerates, Machinery, Marine, Professional Services, Road & Rail, Trading Companies & Distributors, and Transportations Infrastructure. The top five industries in 2014, by total stock return, were Airlines 61.34%, Road & Rail 27.86%, Electrical Equipment 19.2%, Aerospace & Defense 12.92%, and Air Freight & Logistics 12.88%. The Industrial sector is generally classified as an economi-cally sensitive sector as factors, both domestic and foreign, affect the Industrial Sector immensely.

Airlines Overview

The Airlines Industry made huge gains in 2014 and topped the sector with an industry return of 61.34%. The success in the Airlines Industry was due, in large part, to the declining oil prices and a strengthening U.S. economy. Low oil prices, which fell by as much as 80%, allowed companies in the industry to cut costs and increase margins. If the price of oil continues to drop, there is typically an inverse relationship between the price of crude and the airlines stock price. The Airlines Industry is one that the IMP class will watch closely going forward.

Industrial Conglomerates Overview

Industrial Conglomerates is one of the five largest industries within the Industrial Sector. It has a market cap of $606 billion and accounts for about 19% of the overall sector. Industrial Conglomerates per-formed badly in 2014, producing a return of 0.94%. IMP holds two of the best performing stocks within the Industrial Conglomerates Industry, Danaher and 3M. The industry’s YTD return of -0.87% is currently trailing the S&P by 0.39%, but outperforming the sector which has a -2.05% return. There are seven major companies in the industry that produce a variety of products with the ability to influ-ence multiple markets. The industry has a large exposure to the global economy and can strongly benefit from economic growth. Currently,

companies in the industry are facing unfavorable currency transla-tions as the strength of the U.S. dollar proves to be a huge negative factor for net exporting companies in the U.S. This problem should resolved in the near future, as a majority of the struggling countries are in their recovery phase and beginning to grow. However, this may change if the U.S. raises interest rates. Various tools are in place within the Industrial Conglomerate Industry to combat the problem of slow growth. For example, some companies in the industry are able to cut internal costs, which will improve their bottom line. Another major objective of companies in this industry is to keep cash on hand in case the opportunity to make acquisitions occurs, which have proven to be a large part of their global growth in the past and into the future.

Air Freight and Logistics Overview

The Air Freight and Logistics Industry is one of the smaller industries in the Industrials Sector. The industry slightly underperformed the S&P 500 in 2014 with returns of 12.88% and 13.69% respectively. Air Freight & Logistics experienced gains in 2014 primarily due to the strength of the U.S. economy and falling oil prices. Lower oil prices allowed the companies to cut costs as well as increase margins. Currently, the industry is heavily underperforming the S&P 500 with returns of -8.58% and 0.39%, respectively. The decline can be contributed to the industry’s high level of international exposure. This makes the firms vulnerable to downturns in global trade and political interference. Until the global economy is able to strengthen and expand at a quicker rate, the industry may continue to lag behind the market and sector.

Road & Rail Overview

The Road & Rail Industry currently accounts for 8% of the sector by market cap. The industry includes freight and passenger railroads, trucking transportation and vehicle rental companies. 2014 proved to be a big year for the Road and Rail Industry. It provided returns of 27.86%, doubling that of the S&P 500. As with the Airlines Industry, this was due in large part to lower energy prices in the U.S. and abroad.


Sector 6.09% 50.24% 73.36%

S&P 500 11.56% 48.82% 75.22%



Danaher Corp (NYSE: DHR)

Analyst: Chad BrooksSector: IndustrialsMarket Cap: $60.32BIndustry: Diversified IndustrialsStock Type: Large GrowthHolding Return: 237.8%Morningstar Rating: **


INDUSTRY 2014

Total Return % 25.66 (0.08) 19.05 38.28 11.54 0.94

Return on Assets % 8.58 8.33 7.61 7.97 7.25 8.85

Return on Equity % 14.15 14.19 13.32 13.02 11.36 11.66

Net Margin % 13.58 13.50 13.10 14.10 13.05 17.99

Asset Turnover 0.63 0.62 0.58 0.57 0.56 0.59




18.04 21.87 13.49 4.7 4.16 29.25


40.45 20.81 20.93 3.47 4.78 --

EPS Growth % 52.60 17.80 8.04 13.10 (4.47) --

Current Ratio 1.73 1.50 1.80 2.01 1.75 5.14


P/E 18.0 17.0 17.3 20.3 23.6

P/B 2.3 1.9 2.0 2.4 2.6

P/S 2.4 2.1 2.2 2.9 2.1

P/FCF 15.5 12.6 11.7 15.3 16.3

Dividend Yield % 0.17 0.19 0.18 0.13 0.47


Business Summary:Danaher Corporation designs, manufactures, and markets profes-sional, medical, industrial, and commercial products and services worldwide. Danaher Corp has five segments that allow it to diversify its services and success. These diversified segments include test and measurement, environmental, life sciences, and diagnostics, dental, and industrial technologies. Each of these segments provides a va-riety of services and allows Danaher to reach certain niche markets all around the world.

Investment Rationale/Risk: x Because of Danaher’s excellent business integration system and

acquisitions, they have been able to produce consistent double-digit margins and higher cash flows

x Danaher has stretched further into health care and life sciences, which now make up over 45% of their total revenue

x Companies’ stock price remains relatively strong despite unfa-vorable currency translations that hurt revenues by 3.5% in Q4 of 2014


Current year % 16.00 (2.10)

Next year % 9.20 12.40

Past 5 years % 12.67 --

Next 5 years % 9.00 13.92


General Electric Co (GE) (6.67) 11.78

3M Co (MMM) 19.6 32.38

Siemens AG (SIEGY) (16.2) 18.19



FedEx Corp (NYSE: FDX)

Analyst: Chad Brooks Sector: IndustrialsMarket Cap: $46.9BIndustry: Integrated Shipping & LogisticsStock Type: Large GrowthHolding Return: 108.3%Morningstar Rating: ***’


INDUSTRY 2014

Total Return % 12.02 (9.67) 10.49 57.39 21.31 12.88

Return on Assets % 4.82 5.55 7.09 4.92 6.29 3.09

Return on Equity % 8.63 10.0 13.57 9.72 12.84 7.25

Net Margin % 3.41 3.69 4.76 3.52 4.6 2.43

Asset Turnover 1.41 1.5 1.49 1.4 1.37 1.16




(2.15) 13.16 8.59 3.77 2.89 6.56


167.47 19.02 33.98 (19.93) 35.08 --

EPS Growth % -- 21.54 40.26 (23.4) 37.47 --

Current Ratio 0.12 0.11 0.08 0.16 0.31 1.31


P/E 22.2 15.2 14.7 27.7 21.9

P/B 2.0 1.6 1.9 2.6 3.2

P/S 0.8 0.6 0.7 1.0 1.1

P/FCF 7.7 6.3 6.6 10.0 10.6

Dividend Yield % 0.51 0.61 0.6 0.41 0.43


Business Summary:FedEx Corporation provides transportation, e-commerce, and busi-ness services in the United States and internationally. They operate in four main businesses: FedEx Express, FedEx Ground, FedEx Freight and FedEx Services. With these main business units, FedEx is able to efficiently transport products around the globe. The FedEx Express segment provides various shipping services for the delivery of packages and freight, including all of the requirements needed to ship internationally. The FedEx Ground segment provides business and residential money-back guaranteed ground package delivery services, and consolidates and delivers high volumes of low-weight and less time-sensitive business-to-consumer packages. The FedEx Freight segment offers less-than-truckload freight services, as well as freight-shipping services, operating more than 62,000 vehicles and trailers from over 370 service centers. The FedEx Services segment provides sales, marketing, information technology, communications, customer service, other back-office support services, and tracking systems.

Investment Rationale/Risk: x They are highly exposed to the price of crude oil, and the recent

low oil prices have helped the company cut costs in delivery both in air and freight

x The firm is one of the largest logistics companies in the world, and a recent merger to increase market share in Europe from 3% to 17% will benefit them greatly

x The company should continue to grow as the world economy strengthens



Next year % 21.5 22.9

Past 5 years % 14.46 --

Next 5 years % 21.5 22.9


United Parcel Service Inc. (UPS) 8.35 70.39

Deutsche Post AG (DPSTF) (12.02) 21.1

CH Robinson Worldwide (CHRW) 30.8 45.27



Southwest Airlines Co. (NYSE: LUV)

Analyst: Chad BrooksSector: IndustrialsMarket Cap: $29.9BIndustry: AirlinesStock Type: Large CoreHolding Return: 11.9%Morningstar Rating: ***


INDUSTRY 2014

Total Return % 13.72 (33.91) 20.03 85.25 125.8 61.34

Return on Assets % 3.09 1.06 2.30 3.97 5.75 (7.61)

Return on Equity % 7.84 2.71 6.07 10.52 16.10 (24.8)

Net Margin% 3.79 1.14 2.46 4.26 6.11 (5.51)

Asset Turnover 0.81 0.93 0.93 0.93 0.94 1.18


Operating Margin% 8.2 4.4 3.6 7.2 12.0 (5.75)


16.95 29.36 9.13 3.58 5.12 5.48


277.1 (29.86) (10.1) 105.14 74.1 --

EPS Growth% 369.23 (62.3) 143.48 87.5 56.19 --

Current Ratio 1.29 0.96 0.91 0.79 0.74 0.80


P/E 21.1 37.3 18.4 18.0 25.9

P/B 1.6 1.0 1.1 1.8 4.2

P/S 0.8 0.4 0.5 0.8 1.6

P/FCF 6.2 4.8 3.8 5.5 10.2

Dividend Yield % 0.14 0.21 0.34 0.69 0.52


Business Summary:Southwest Airlines and AirTran Airways operate commercial air-lines that provide air transportation services in the United States and near-international markets. Southwest operates 665 Boeing 737 aircraft, and 12 Boeing 717, which is different from years past. They serve 93 destinations in 40 states, the District of Columbia, the Commonwealth of Puerto Rico, as well as 5 other near-international counties including Mexico, the Bahamas, Aruba, Jamaica, and the Dominican Republic. Southwest Airlines also has its sights set on expanding operations into more countries around the world in the near future. The company has also partnered with other businesses, including car rental agencies, hotels, restaurants, and retail locations, to offer reward programs.

Investment Rationale/Risk: x Low oil prices proved to help decrease costs and increase profit

margins in 2014, and a long standing oil hedge kept them profit-able throughout a decade of high oil prices

x Mergers amongst large competitors provide pricing power for the industry as a whole

x Southwest has won new slots in high traffic markets at Reagan National Airport in Washington D.C., as well as LaGuardia in New York; acquisitions that may provide growth and allow them to expand into new locations

x Southwest has the ability to maintain a low cost structure by operating planes with interchangeable parts

x A shift from long-standing fundamentals creates a large risk for the stock, as low fees and domestic point to point flights have been replaced by skyrocketing fees as well as international flights at major airports



Next year % 6.3 22.9

Past 5 years % 41.25 --

Next 5 years % 29.13 9.47


Delta Air Lines Inc. (DAL) 80.16 6.44

American Airlines Group Inc. (AAL) 113.19 --

United Continental Holdings Inc. (UAL) 76.82 42.08



3M Company (NYSE: MMM)

Analyst: Benjamin ShenkSector: IndustrialsMarket Cap: $105.04BIndustry: Diversified IndustrialsStock Type: Large CoreHolding Return: 110.9%Morningstar Rating: **


INDUSTRY

2014

Total Return % 6.93 (2.75) 16.49 53.79 19.60 0.94

Return on Assets % 14.23 13.87 13.57 13.82 15.29 3.39

Return on Equity % 28.74 27.56 26.94 26.56 32.38 9.43

Net Margin % 15.32 14.46 4.86 15.09 15.57 5.01

Asset Turnover 0.93 0.96 0.91 0.92 0.98 0.74

Financial Leverage 0.27 0.30 0.28 0.25 0.52 .95



15.31 11.06 0.99 3.23 3.08 8.76


22.93 4.39 4.94 2.82 7.04 --

EPS Growth % 24.56 5.86 6.04 6.33 11.46 5.57

Current Ratio 2.01 2.25 2.20 1.70 1.96 1.37


P/E 15.3 13.7 14.7 20.9 21.9

P/B 3.9 3.7 3.6 5.3 8.0

P/S 2.3 2.0 2.2 3.2 3.4

P/FCF 12.1 11.1 12.3 16.7 16.4

Dividend Yield % 2.43 2.69 2.54 1.81 2.08


Business Summary:3M Company operates as a diversified technology company world-wide. The company’s diverse business portfolio includes segments in industrials, safety and graphics, electronics and energy, healthcare, and consumer goods. Within the company’s five business segments, individual products cover a large array of goods that are provided worldwide, making for a well-diversified revenue base.

3M serves automotive, electronics and energy, appliance, paper and printing, packaging, food and beverage, construction, clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, food manufacturing and testing, retail, home improvement, build-ing maintenance, and many other markets. In addition, the company sells products through wholesalers, retailers, jobbers, distributors, and dealers, as well as directly to users. The company was founded in 1902 and is headquartered in St. Paul, Minnesota.

Investment Rationale/Risk: x 3M has a long history of maintaining well-developed revenue streams

through its distribution, diversification, innovation, and patent portfolio

x The company’s tendency to focus toward consumable products continues to provide stable profits without extraordinary volatility

x Although growth is only expected to track that of the overall economy, the company’s stability and healthy dividend provide for a stable future outlook

x Stock-buyback and capital restructuring programs hold short-term stock-price incentives, as well as long term cost-savings incentives for investors, though these actions carry the risk of increasing leverage at the top of a cycle, which could be painful if economic growth slows



Next year % 10.00 12.80


Next 5 years % 9.51 15.26


General Electric Co (6.67) 11.78

Siemens AG (14.97) 18.19

Honeywell International Inc. 11.40 24.14



Overweight Information Technology Sector

Sector Overview

The Information Technology sector is one of the most innovative and thriving divisions out of the ten Global Industry Classification Standard sectors. The five industries in which the IMP class invested include: Electronic Equipment, Communications Equipment, IT Services, Software, and Semiconductors. The Electronic Equipment industry includes producers of electronic equipment, instruments, and electronic components. The Communications Equipment industry includes manufacturers of communications equipment and products, including routers, phones, and switchboards. The IT Services industry includes providers of information technology systems integration services, IT consulting, and commercial electronic data processing. The Software industry includes application, systems, and home en-tertainment software companies engaged in developing and produc-ing software for the business and consumer market. The IMP class is optimistic when it comes to their holdings in the IT sector due to the high demand for technology and growing niche markets such as online security, wearable technology, and electronic payments. The class decided to overweight the IT sector compared to the S&P 500 because of this positive outlook.

Electronic Equipment, Instruments, and Components Overview

This industry includes producers of electronic equipment, instru-ments, electric components, connection devices, etc. The current holding, Apple, Inc., had a breakout year in 2014 with a total return of 37.7%, while the industry average was 33.38%.

Communications Equipment Overview

The Communications Equipment industry includes manufactur-ers of communications equipment and products, including routers, phones, and switchboards. The IMP portfolio holds Cisco Systems, Inc. which had a strong year with a total return of 24.0%, compared to the industry’s return of 8.80%

Information Technology Services Overview

Companies in this industry provide services such as software support, computer systems design, and data processing facilities management. IMP holds Accenture PLC Class A in this industry. The industry had a very poor year with a return of -0.35%, while Accenture had a decent return of 12.3%

Software Overview

This industry includes companies that are engaged in the design and marketing of computer operating systems and applications. The IMP class invested in Microsoft, which had a strong return of 24.2% in 2014, compared to the industry return of 20.10%

Semiconductor Overview

This industry includes manufacturers of semiconductors and related products and equipments. The Semiconductor industry posted one of the strongest returns in 2014 with a total return of 29%. The two holdings in the IMP portfolio are Intel and NXP Semiconductors. These two stocks had total returns of 39.8% and 0.2%, respectively.


Sector 18.61% 40.18% 82.59%

S&P 500 11.56% 48.82% 75.22%



Apple Inc. (NASDAQ: AAPL)

Analyst: Colin WardSector: Information TechnologyMarket Cap: $730BIndustry: Consumer ElectronicsStock Type: Large GrowthHolding Return: 336.7%Morningstar Rating: ***


INDUSTRY 2014

Total Return % 53.1 25.6 32.7 7.6 40.0 33.38

Return on Assets % 22.8 27.1 28.5 19.3 18.0 7.0

Return on Equity % 35.3 41.7 42.8 30.6 33.6 15.5

Net Margin % 21.5 24.0 26.7 21.7 21.6 7.0

Asset Turnover 1.06 1.13 1.07 0.89 0.83 1.13




34.22 39.75 30.83 8.43 6.95 18.52


36.14 45.59 38.83 (12.74) 7.15 9.2

EPS Growth % 66.85 82.17 59.50 (9.97) 13.58 --

Current Ratio 2.01 1.61 1.50 1.68 1.08 1.52


P/E 18.0 11.5 12.1 13.9 14.9

P/B 5.4 4.2 3.9 3.9 5.2

P/S 3.9 3.0 3.1 3.0 3.3

P/FCF 13.2 8.4 8.9 9.8 9.4

Dividend Yield % -- -- 1.00 2.10 1.67


Business Summary:Apple designs and manufactures consumer electronic devices, includ-ing PCs (Mac), tablets (iPad), phones (iPhone), and portable music players (iPod). Apple’s products run internally developed software; this integration of hardware and software allows the firm to maintain premium pricing for its devices. Apple’s products are distributed online as well as through company-owned stores and third-party retailers. In June of 2014, Apple had a 7-1 stock split making the new price per share very attractive for investors. They also introduced two new iPhones in 2014, the iPhone 6 and the iPhone 6 plus, which has helped them remain a strong competitor in the industry.

Investment Rationale/Risk: x Apple’s products and the iOS operating system create strong

brand loyalty

x The company is an industry leader in innovation and has recently created two new technologies including the Apple Watch and ApplePay

x Apple is a financially strong company with vast amounts of rev-enues, profits, margins, cash flows, and cash on hand equaling around $180 billion



Next year % 8.30 3.40

Past 5 years % 28.39 --

Next 5 years % 12.95 8.82


Google (GOOG) (5.39) 15.06

Microsoft (MSFT) 27.24 26.17



Analyst: Jeremie PatrickSector: Information TechnologyMarket Cap: $61.5BIndustry: Information Technology ServicesStock Type: Large GrowthHolding Return: 12.30%Morningstar Rating: ***


INDUSTRY 2014

Total Return % 18.83 12.10 27.72 26.26 10.99 (0.35)

Return on Assets % 14.19 15.95 15.76 19.57 16.91 5.82

Return on Equity % 62.24 67.84 63.64 72.08 55.02 2.87

Net Margin % 7.71 8.33 8.58 10.80 9.23 9.82

Asset Turnover 1.84 1.92 1.84 1.81 1.83 0.73




(0.33) 18.44 8.87 2.07 4.87 0.80


10.25 19.06 11.56 12.07 (0.88) --

EPS Growth % 9.02 27.822 12.94 28.39 (8.32) --

Current Ratio 1.46 1.45 1.55 1.45 1.46 3.77


P/E 19.7 16.5 18.4 17.5 20.4

P/B 11.6 9.8 10.1 11.1 10.7

P/S 1.5 1.4 1.6 1.9 1.9

P/FCF 12.3 10.3 13.1 16.2 14.7

Dividend Yield % 1.70 2.11 2.23 2.12 2.18

Accenture PLC Class A (NYSE: ACN)


Business Summary:Accenture is one of the world’s leading organizations providing man-agement consulting, technology and outsourcing services, with more than 323,000 employees; offices and operations in 56 countries; and net revenues of $30.0 billion for fiscal 2014. The company has four growth platforms: Accenture Strategy, Accenture Digital, Accenture Technology, and Accenture Operations. These growth platforms are innovation engines through which Accenture builds world-class skills and capabilities; develops knowledge capital; and creates, acquires and manages key assets central to the development of integrated services and solutions for their clients. Accenture enables their clients to become high-performance businesses and creates long-term relation-ships by being responsive, relevant and by consistently delivering value.

Investment Rationale/Risk: x Accenture documented record revenues and bookings in 2014

and also delivered $3.8 billion in cash back to their shareholders

x The company continues to grow momentum in their business by differentiating their strategic, digital, technological, and operational capability

x Strong mergers continue to help Accenture cut costs

x Accenture signed a 5-year contract extension worth $563 mil-lion to support the HealthCare.gov (Obamacare) insurance exchange site



Next year % 8.60 21.40

Past 5 years % 12.07 --

Next 5 years % 9.97 20.25


International Business Machines Corp. (IBM) (12.20) 69.37

Infosys Ltd ADR (INFY) 13.25 22.94

Cognizant Technology Solutions Corp. (CTSH) 4.30 20.47



Cisco Systems Inc. (NASDAQ: CSCO)

Analyst: Jeremie PatrickSector: Information TechnologyMarket Cap: $138.5BIndustry: Communication EquipmentStock Type: Large ValueHolding Return: 43.30%Morningstar Rating: ***


INDUSTRY 2014

Total Return % (15.50) (9.74) 11.45 16.75 27.31 8.80

Return on Assets % 10.41 7.72 8.99 10.35 7.61 8.10

Return on Equity % 18.74 14.19 16.32 18.08 13.57 14.90

Net Margin % 19.40 15.02 17.46 20.54 16.66 13.10

Asset Turnover 0.54 0.51 0.52 0.50 0.47 0.87




10.86 7.94 6.58 5.53 (3.01) (4.80)


25.16 (16.2) 31.16 11.24 (16.53) --

EPS Growth % 26.67 (12.03) 27.35 24.83 (19.89) --

Current Ratio 2.67 3.27 3.49 2.95 3.39 1.93


P/E 14.8 15.7 12.7 12.3 18.9

P/B 2.5 2.1 2.0 2.0 2.5

P/S 2.8 2.3 2.3 2.5 3.1

P/FCF 11.3 9.3 9.1 9.3 11.9

Dividend Yield % -- 1.00 2.54 2.27 2.66


Business Summary:Cisco Systems, Inc. is the worldwide leader in IT that helps com-panies seize the opportunities of tomorrow by proving that amazing things can happen when one connects the previously unconnected. As the creator of the multi-protocol router, they currently provide switching products and storage products that provide connectivity to users, workstations, IP phones, wireless access points, and servers. Also, Cisco provides new routing products that interconnect public and private wireline and mobile networks for mobile, data, voice, and video applications. Their supply chain consists of over 600 suppliers worldwide that manufacture, test, ship and recycle Cisco’s products. Cisco Systems Inc. has become leaner and is now a more focused competitor in their industry. Scale advantages and significant customer switching costs provide the company with competitive advantages in its core markets.

Investment Rationale/Risk: x Cisco Systems, Inc. continues to be a geographically diverse

business tapping into many sophisticated markets

x Strong research and development has provided the company with a robust financial position and a record breaking year in 2014

x Cisco continues to produce strong dividends, returning a record $13.3 billion to shareholders in 2014

x The company continues to make strong acquisitions to bring value to customers through applications and services



Next year % 4.60 26.50


Next 5 years % 8.17 16.10


Alcatel-Lucent (ALU) (19.32) (4.92)

Hewlett-Packard Company (HPQ) 45.66 18.57

Juniper Networks, Inc. (JNPR) (0.22) (5.47)



Intel Corp. (NASDAQ: INTC)

Analyst: Colin WardSector: Information TechnologyMarket Cap: $145.6BIndustry: SemiconductorsStock Type: Large CoreHolding Return: 69.9%Morningstar Rating: ***


INDUSTRY 2014

Total Return % 6.18 19.03 (11.38) 30.24 43.29 29.00

Return on Assets % 19.72 19.27 14.16 10.89 12.70 0.62

Return on Equity % 25.16 27.15 22.66 17.58 20.51 (55.16)

Net Margin % 26.28 23.97 20.63 18.25 20.95 (19.85)

Asset Turnover 0.75 0.80 0.69 0.60 0.61 0.67


Operating Margin % 35.7 32.4 27.4 23.3 27.5 (18.36)


24.19 23.79 (1.22) (1.19) 6.00 7.91


172.95 12.12 (16.24) (16.03) 24.86 --

EPS Growth % 161.04 18.91 (10.88) (11.27) 22.22 --

Current Ratio 3.39 2.15 2.43 2.36 1.73 2.68


P/E 10.4 10.1 9.7 13.8 15.7

P/B 2.3 2.6 2.0 2.2 3.1

P/S 2.7 2.4 2.0 2.5 3.3

P/FCF 7.2 6.3 5.6 6.4 9.0

Dividend Yield % 3.00 3.23 4.22 3.47 2.48


Business Summary:As the world’s largest chipmaker, Intel Corp designs, manufactures, and sells integrated digital technology platforms for industries such as computing and communications. They develop and manufacture microprocessors and platform solutions for the global personal com-puter, mobile computing, and data center markets. The emergence of ARM processors has increased the competition by being the “go to” processor for most smartphones and tablets. Intel has benefited tremendously from the proliferation of personal computers in the past few decades and has long held the lead in microprocessor technology and performance.

Investment Rationale/Risk: x Intel is the dominant force in the roughly $30 billion computer

microprocessor market

x Investors expect Intel to be able to become the leader in processor sales in the next year or two when the company’s atom proces-sors, which are more power efficient, narrow the gap with ARM

x The growing cloud computing trend should lead to substantial server build outs to create the cloud infrastructure, boosting Intel’s lucrative server processor business



Next year % 12.60 22.20


Next 5 years % 8.25 15.45


Texas Instruments (TXN) 24.58 26.62

Broadcom (BRCM) 47.78 7.48



Microsoft Corp. (NASDAQ: MSFT)

Analyst: Jeremie PatrickSector: Information TechnologyMarket Cap: $330.5BIndustry: Software - InfrastructureStock Type: Large CoreHolding Return: 83.10%Morningstar Rating: ****


INDUSTRY 2014

Total Return % (6.63) (4.55) 6.09 43.69 27.24 20.10

Return on Assets % 22.88 23.77 14.77 16.58 14.02 11.20

Return on Equity % 43.76 44.84 27.51 30.09 26.17 21.20

Net Margin % 30.02 33.10 23.03 28.08 25.42 21.80

Asset Turnover 0.76 0.72 0.64 0.59 0.55 0.57




6.93 11.94 5.40 5.60 11.54 7.30


18.34 12.71 (19.87) 22.98 3.72 --

EPS Growth % 29.63 28.10 (25.65) 29.00 1.94 --

Current Ratio 2.13 2.60 2.60 2.71 2.50 1.96


P/E 11.9 9.4 14.7 13.8 18.8

P/B 4.8 3.4 3.1 3.6 4.2

P/S 3.7 3.1 3.1 3.8 4.1

P/FCF 9.6 7.6 7.4 11.2 12.0

Dividend Yield % 1.97 2.62 3.11 2.59 2.48


Business Summary:Microsoft’s focus is to create a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most. The company primarily monetizes their high-value activities by leading with devices and enterprise services. Microsoft’s consumer services such as Bing and Skype differentiates their devices and serves as an on-ramp to their enterprise services while generating some revenue from subscriptions and advertising. Enterprise services continue to be an area of great strength, growth, and opportunity as businesses of all sizes look to Microsoft to help them move to the cloud, manage a growing number of devices, tap into large data, and embrace new social capabilities.

Investment Rationale/Risk: x Microsoft continues to retain great brand loyalty and reputation

x Strong demand for enterprise and cloud offerings resulted in a record unearned revenue balance in the fourth quarter of 2014

x The cloud services, Office 365, Windows Azure and Dynam-ics CRM demonstrate Microsoft’s strong position in the cloud market



Next year % 21.00 21.40


Next 5 years % 8.13 20.25


Apple Inc. (AAPL) 40.03 33.61

Google Inc. (GOOGL) (5.39) 15.06

Oracle Corp. (ORCL) 18.79 23.94



NXP Semiconductors (NASDAQ: NXPI)

Analyst: Colin WardSector: Information TechnologyMarket Cap: $25.0BIndustry: SemiconductorsStock Type: Large GrowthHolding Return: 0.20%Morningstar Rating: --


INDUSTRY 2014

Total Return % -- (26.56) 71.24 74.51 66.34 29.00

Return on Assets % (5.59) 5.47 (1.76) 5.40 8.08 (4.33)

Return on Equity % (47.60) 36.60 (10.48) 29.62 58.62 (55.16)

Net Margin % (10.36) 9.30 (2.64) 7.23 9.54 (19.85)

Asset Turnover 0.54 0.59 0.67 0.75 0.85 0.67


Operating Margin % 6.2 8.5 9.5 13.5 18.6 (18.36)


14.55 (4.73) 3.91 10.49 17.28 7.94


-- 30.77 15.41 58.01 61.14 --

EPS Growth % -- -- -- -- 59.56 --

Current Ratio 1.22 1.87 1.31 1.75 2.00 2.68


P/E -- -- -- 33.8 35.2

P/B 5.63 3.4 6.3 8.9 35.7

P/S 1.1 0.9 1.5 2.4 3.4

P/FCF 13.0 19.6 9.0 13.1 12.9



Business Summary:NXP Semiconductors creates solutions that enable secure connections for a smarter world. Building on its expertise in High Performance Mixed Signal electronics, NXP is driving innovation in the automo-tive, identification and mobile industries, and in application areas including wireless infrastructure, lighting, healthcare, industrial, and consumer tech and computing. NXP’s headquarters are located in Holland, and the company has operations in more than 25 countries.

Investment Rationale/Risk: x NXP Semiconductors dominates the Near Field Communica-

tion (NFC) market and supplies the chips used in almost every Smartphone

x The company creates chips that are used in credit cards, com-muter cards, video game consoles, and medical tools

x NXP is the global market leader in producing automotive chips for in-vehicle networking, passive keyless entry and immobili-zation, and car radios, as well as silicon tuners for the TV and set-top-box market

x The company recently announced that it is pairing up with Eu-ropean automakers to introduce their NFC technology into cars



Next year % 12.90 36.10

Past 5 years % 37.80 --

Next 5 years % 22.53 15.72


Intel Corp. (INTC) 43.29 20.51

Texas Instruments (TXN) 24.58 26.62



Overweight Basic Materials

Sector Overview

The basic materials sector had a difficult time in 2014. The sector saw annual returns of 2.40%, which underperformed both the S&P 500 and many of the other sectors. Basic materials, by their very nature, are impacted by a variety of factors such as global economic growth, food consumption patterns, and general global issues. Lately, China has witnessed a slumping real estate market while many developed countries are experiencing reduced construction. Both of these trends have reduced demand for lumber, steel, and other materials produced by the sector. These stocks will likely realize their true value moving forward as prices for material stocks stabilize and begin to rise again. Lately, emerging markets have experienced a strengthening middle class. While developed countries stabilize, emerging markets will continue to help drive the materials sector into forward growth.

Agriculture Chemicals Overview

Agriculture is an industry that provides a lot of growth potential for the basic materials sector. Looking forward, the global population is expected to grow to 2 billion people by 2050. At the same time, emerging markets see greater food requirements as a result of larger middle class. Both of these scenarios point to the need for greater food production. Since much of the world’s land is already being farmed, the way to achieve greater production is to find more productive strains of seeds and identifying fertilizers that are more beneficial to crops. Because of this, companies in the chemical industry who cater to agricultural needs are expected to see great returns in the long run.

Specialty Metals Overview

Another attractive part of the materials sector is the specialty metals segment. This segment combines a variety of metals to produce light-weight alloys. These companies are in a great position because of the wide range of raw materials that are available to use for production. As prices for different metals fluctuate, they can adjust the mix of the metals used to utilize lower cost products and in turn keep their total expenses lower. Moving forward, these firms are expected to see increased benefits since their customers reside in the stage of recovery.

Metals Overview

Many firms involved in the extraction and resale of metals watched their stock decline as prices for metals fell and their short term revenue growth disappeared. Despite the downfalls, there are still attractive deals in this industry if investing for the long term. The most attractive firms are those that are well established with low operational costs. This type of firm is well positioned to survive the current low metal prices and should greatly benefit when metal prices rise.


Sector 3.73% 34.21% 46.93%

S&P 500 11.56% 48.82% 75.22%



Air Products & Chemicals (NYSE: APD)

Analyst: Michael KuderSector: Basic MaterialsMarket Cap: $32.6BIndustry: ChemicalsStock Type: Large CoreHolding Return: 62.3%Morningstar Rating: **


INDUSTRY 2014

Total Return % 14.62 (3.78) 1.63 36.42 31.79 1.58

Return on Assets % 7.76 8.81 7.47 5.72 5.57 4.38

Return on Equity % 19.91 21.59 19.02 14.71 13.77 6.68

Net Margin % 11.40 12.14 12.14 9.77 9.50 5.92

Asset Turnover 0.68 0.73 0.62 0.59 0.59 0.97




9.32 11.70 (4.66) 5.92 2.54 11.12


64.13 16.79 (20.95) 3.28 0.29 --

EPS Growth % 60.14 18.78 (3.37) (13.97) (1.50) 28.18

Current Ratio 1.35 1.36 1.27 1.07 1.11 2.13


P/E 18.9 15.4 17.2 23.4 30.4

P/B 3.4 3.0 2.8 3.3 4.2

P/S 2.1 1.8 1.8 2.3 3.0

P/FCF 11.9 10.0 11.1 13.1 14.6

Dividend Yield % 2.16 2.72 3.05 2.54 2.14


Business Summary:Air Products & Chemicals (APC) produces atmospheric gases and is the largest producer of helium and hydrogen. The company operates 750 production facilities and 1800 miles of industrial gas pipelines which serve over 30 industries including energy, electronics, chemi-cals, and manufacturing. The company operates internationally in 54 counties, with 60% of sales coming from foreign countries. The company finished 2014 with $10.4 billion in sales and approximately 21,200 workers.

Investment Rationale/Risk: x The industry is largely consolidated; Air Products is amongst

the top four companies in the industry which collectively share 80% of the market

x Air Products has a large exposure to China’s oxygen needs, which will benefit the company as China increases their demand for oxygen

x Roughly 90% of the hydrogen needs for Gulf Coast refineries is supplied by Air Products

x APC maintains a large stake in the hydrogen supply to the Canadian oil sands



Next year % 12.80 17.10


Next 5 years % 11.98 17.24


Dow Chemical Co (DOW) 6.17 16.61

Eastman Chemical Co (EMN) (4.20) 20.56

Ashland Inc (ASH) 24.81 5.73



International Paper Com. (NYSE: IP)

Analyst: David CalambasSector: Basic MaterialsMarket Cap: $23.12BIndustry: Paper PackagingStock Type: Large ValueHolding Return: -2.2%Morningstar Rating: ***


INDUSTRY 2014

Total Return % 3.21 12.24 38.27 26.20 13.83 13.97

Return on Assets % 2.53 5.12 2.68 4.38 1.84 3.50

Return on Equity % 10.02 19.93 12.29 19.36 8.40 15.00

Net Margin % 2.56 5.15 2.85 4.80 2.35 3.70

Asset Turnover 0.99 0.99 0.94 0.91 0.78 0.81




7.76 3.40 6.91 4.48 (18.79) 24.98


(57.34) 169.71 (14.70) 15.71 12.57 --

EPS Growth % (4.52) 107.43 (41.37) 72.78 (58.52) --

Current Ratio 1.78 2.21 1.78 1.76 1.62 1.78


P/E 18.40 10.00 23.40 16.30 41.00

P/B 1.70 1.90 2.80 2.60 4.40

P/S 0.50 0.50 0.60 0.80 1.00

P/FCF 7.30 4.80 5.90 7.30 7.50

Dividend Yield % 1.47 3.29 2.73 2.55 2.71


Business Summary:International Paper Company (IP) is a paper and packaging company, with markets and manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. As of September 30, 2014, the company operates in three segments: industrial packaging, printing papers, consumer packaging, and distribution. As of December 31, 2014, the company operated 25 pulp, paper and packaging mills, 181 converting and packaging plants, 18 recycling plants and three bag facilities in the United States. As of December 31, 2014, it has production facilities in Europe, Asia, Africa, India, Latin America and South America, which included 16 pulp, paper and packaging mills, 72 converting and packaging plants, and 2 recycling plants. As of December 31, 2014, it owned or managed approxi-mately 332,000 acres of forestland in Brazil and had, through licenses and forest management agreements, harvesting rights on government-owned forestlands in Russia.

Investment Rationale/Risk: x Over the past decade, International Paper has undergone a massive

corporate restructuring in which it has eliminated a number of noncore business activities to improve its position in the packaging industry, subsequently holding about a one-third share in the North American containerboard industry

x Despite selling its timberland, IP continues to benefit from a low-cost production advantage since it locked in a ten year fiber supply contract with the new landowners

x Management’s decision to detract the business activities it was in-volved in and focus efforts in one area has provided positive results and demonstrates the senior managements’ strategic approach to increase shareholder value



Next year % 14.60 14.50

Past 5 years % 24.08 --

Next 5 years % 14.57 9.84


Domtar Corp. (UFS) (11.77) 15.20

MeadWestvaco Corp. (MWV) 25.62 7.46

UPM-Kymmene Oyj (UPMKY) 0.80 6.86



Underweight Telecommunications Sector

Sector Overview

The Telecommunications sector consists of companies engaged in fixed-line and wireless telecommunication networks for voice, data and high-density data. The Telecommunications sector has histori-cally performed the best during the recession-cycle business phase, when the market is contracting.

Telecommunications has seen rapid technological improvement even during recession. Unprecedented growth in high-speed mobile In-ternet traffic, particularly in wireless data and video, has transformed the sector into an evolving, inventive and keenly contested space. Any new telecommunications network standard attempts to provide faster data connectivity, quicker video streaming with high resolution and better multimedia applications. The rising demand for technically superior wireless products has been the silver lining for the telecom sector in an otherwise tough environment.

The telecommunications sector is known for its huge barriers to entry. Deployment of high-speed network infrastructure requires significant capital expenditure, which very few entities can afford. In order to maintain network quality and keep up with increasing demand for broadband usage, wireless carriers will have to continue to invest more. The telecommunications sector is attractive because it is composed of companies with stable revenues and predictable cash flows for relatively high dividend payouts. However, given the sector’s defensive reputation, telecommunication services could lag the overall market and other sectors as the overall U.S. economy continues to grow in 2015.

Wireless Telecommunication Services Industry Overview

The Wireless Telecommunications Services industry consists of com-panies engaged in providing wireless communication services, such as paging, cell phone and other satellite telecommunication services. The industry excludes cable television services utilizing satellite delivery.

Diversified Telecommunication Services Industry Overview

The Diversified Telecommunication Services Industry includes Alter-native Carriers, providers of communications, and high-density data transmission services primarily through a high bandwidth/fiber-optic cable network. It includes Integrated Telecommunication Services, operators of primarily fixed-line telecommunication networks, and companies providing both wireless and fixed-line telecommunication services, which are not classified elsewhere.


Sector (0.06)% 20.81% 41.98%

S&P 500 11.56% 48.82% 75.22%



Underweight Utility Sector

Sector Overview

The Utility Sector is composed of companies that offer utilities (i.e. power or electricity) to individuals and companies. Year 2014 was a great year for this sector in the IMP portfolio, as it outperformed the S&P 500. Utility stocks are interest rate sensitive and tend to perform better in the later stages of the business cycle. This sector is known for steady, high dividends. Companies are heavily regulated by local and state governments, which can either cause problems or motivate companies to innovate. The rates charged in this industry are generally set by governments. Overall, this sector carries low risk and profitability, responds inversely to market movements, and provides high dividends.

Multi-Line Overview

The multi-line industry is a class of utility companies that offer a diversified array of services, also known as diversified utilities industry. These types of companies can conduct business in different areas of the sector such as power, electricity, and gas. There is a competitive advantage for companies in this industry because of their diversifica-tion. If one area of business becomes unprofitable, there are still other segments of the company to produce profits. Additionally, the profit-ability potential allows it to provide some of the highest dividends in the sector. This also makes the industry superior to many of the other industries in this sector.


Sector 8.87% 29.39% 49.44%

S&P 500 11.56% 48.82% 75.22%



Public Service Enterprise Group Inc. (NYSE:PEG)

Analyst: Chelsea ScomakSector: Utilities Market Cap: $21.5BIndustry: Diversified UtilitiesStock Type: Slow GrowthHolding Return: 25.40%Morningstar Rating: **


INDUSTRY 2014

Total Return % (0.21) 8.08 (3.00) 9.41 33.86 20.32

Return on Assets % 5.33 5.03 4.14 3.87 4.47 2.75

Return on Equity % 16.98 15.10 12.11 11.10 12.76 4.97

Net Margin % 13.26 13.57 13.04 12.47 13.94 12.33

Asset Turnover 0.40 0.37 0.32 0.31 0.32 0.25




(4.94) (6.05) (11.72) 1.91 9.21 11.48


(5.90) (6.64) (16.92) 0.92 14.09 14.04

EPS Growth % (1.91) (3.90) (15.20) (2.39) 22.04 --

Current Ratio 1.45 1.32 1.02 1.18 1.18 1.22


P/E 10.40 11.90 12.20 13.10 13.90

P/B 1.70 1.60 1.40 1.40 1.70

P/S 1.40 1.50 1.60 1.60 1.90

P/FCF 7.50 4.70 5.60 5.10 6.70

Dividend Yield % 4.31 4.15 4.64 4.49 3.57


Business Summary:Headquartered in Newark, New Jersey, Public Service Enterprise Group Incorporated (PSEG) operates as an energy company through its subsidiaries. Company operations include nuclear, coal, gas, oil-fired and renewable generation facilities with a capacity of close to 13,146 megawatts. The company also sells electricity, natural gas, emissions credits, and a series of energy-related products, which are used to optimize the operation of the energy grid. They also invest in solar generation projects, and implement energy efficiency and demand response programs. PSEG ended 2014 owning and operating 17,792 miles of gas mains, owning 12 gas distribution headquarters and 2 sub-headquarters, and operating 62 natural gas metering and regulating stations.

Investment Rationale/Risk: x New Jersey has the ability to place higher regulations on PSEG’s

regulated business

x PSEG is continuing innovative projects and investing in alterna-tive energy as well as efficiency

x The company benefits from the tight supply-demand balance in their region



Next year % 0.70 4.60

Past 5 years % (4.40) --

Next 5 years % 2.23 2.29


Exelon Corp (EXC) 39.91 7.16

PPL Corp (PPL) 25.69 13.31

Dominion Resources Inc (D) 22.58 11.29



PowerShares Senior Loan ETF (BKLN)

Analyst: Colin Ward Sector: Fixed Income Interest Rate Sensitivity: LimitedCredit Quality: MediumAssets under Management: Floating rate loansExpenses: 0.65%Holding Return: -3.1%Morning Star Rating: ***

PORTFOLIO STATISTICS

Average Effective Duration --

Average Credit Quality B

12-Month Yield% 3.98

SEC Yield (YTM)% 4.06

PORTFOLIO COMPOSITION

Corporate Bonds 88.70%

Cash & Equivalents 11.30%

REWARD AND RISK

2014 Return% 1.90

3-Year Annualized Return% 4.02

3-Year Sharpe Ratio 1.59

CREDIT QUALITY COMPOSITION

AAA 1.31 %

AA 0.00%

A 0.00%

BBB 6.79%

BB 33.16%

B 29.05%

Below B 5.04%

Not rated 24.65%

Current Price Net Asset Value (NAV) 52-Week Range$24.18 $24.14 $23.47-$24.94As of 4/6/2015

Exchange Traded Fund (ETF) Overview:This loan ETF is a satellite holding that offers investors the oppor-tunity to diversify their bond portfolios. PowerShares Senior Loan ETF offers diversification for investors through a portfolio holding a variety of floating rate bonds, whose coupon rates adjust with respect to interest rates. This acts as a good hedge against changing interest rates, which is a market concern facing the U.S. in the near future. This fund holds more credit risk as the average credit rating of the funds’ holdings is a B, meaning that more than fifty percent of the holdings in BKLN’s portfolio are below investment grade.

Investment Rationale/Risk: x In the event of rising interest rates, BKLN may not be impacted

as negatively as other bond ETFs

x The fund has a high Securities and Exchange Commission (SEC) yield of 4.06%

x The risks associated with senior loans are similar to the risks of junk bonds, although senior loans typically are secured, whereas junk bonds often are subordinated and unsecured

x The fund has outperformed the US Barclays Aggregate Index over the past three years



WisdomTree LargeCap Dividend ETF (NYSEArca: DLN)

Analyst: Benjamin ShenkSector: High Dividend ETFExpenses: 0.28%Holding Return: 13.7%Morningstar Rating: ****


30-Day SEC Yield % 2.58

Distribution Yield % 2.80

12 Month Yield % 2.43

SECTOR ALLOCATIONS %

Consumer Discretionary 7.86

Consumer Staples 14.51

Energy 11.18

Financials 11.14

Health Care 11.09

Industrials 11.30

Information Technology 14.45

Materials 3.27

Telecommunication Services 7.32

Utilities 4.67

TOP 5 HOLDINGS

Apple Inc. 3.63%

Exxon Mobile Corporation 3.36%

AT & T Inc. 2.88%

Verizon Communications Inc. 2.78%

Microsoft Corporation 2.68%

Current Price Net Asset Value (NAV) 52-Week Range$73.89 $73.35 $66.25-75.56As of 4/6/2015

Exchange Traded Fund (ETF) Overview:This well diversified, passively managed ETF tracks the WisdomTree LargeCap Dividend Index, which is composed of 300 large compa-nies (by market capitalization) that have an indicated regular cash dividend. Rather than weighting by market capitalization, the index and the fund is weighted by the amount of dividends expected to be paid out. This way, the companies that pay the greatest dividend are more heavily weighted in the portfolio.

Investment Rationale/Risk: x Stability of a diversified portfolio of large-cap value stocks

x Passive approach to management allows investors to benefit from diversification with lower than average management expenses

x Consistent, above average dividends provide an alternative source of income

x Research suggests that companies that consistently pay dividends outperform non-dividend paying companies by approximately 1.7% annualized return, with the highest yielding 30% of the market outperforming by even more at 2.6%

REWARD AND RISK DLN S&P 500

1-Year Return % 10.36 11.57

3-Year Annualized Return % 14.46 16.11

3-Year Sharpe Ratio 1.55 1.61

FUND DETAILS

Price to Earnings 17.52

Price to Book 2.59

Return on Equity % --



Analyst: Colin Ward Sector: Fixed Income Interest Rate Sensitivity: LimitedCredit Quality: MediumAssets under Management: U.S. High Yield Corporate BondsExpenses: 0.50%Holding Return: -3.1%Morning Star Rating: ***


Average Effective Duration 4.23 yrs

Average Credit Quality B

12-Month Yield % 5.45

SEC Yield (YTM) % 5.28



Government Bonds 1.64%

Securitized Bonds 0.68%

REWARD AND RISK

2014 Return % 1.90

3-Year Annualized Return % 6.30


CREDIT QUALITY COMPOSITION

AAA 0.00%

AA 0.00%

A 0.00%

BBB 0.87%

BB 43.41%

B 40.88%

Below B 11.59%

Not rated 3.25%


Exchange Traded Fund (ETF) Overview:This fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Markit iBoxx USD Liquid High Yield Index, which consists of U.S.-dollar-denominated high-yield corporate bonds. The fund uses a representative sampling strategy to track the index and currently has about 1,000 holdings. The index is diversified by issuer and sec-tor. Individual issuers are capped at 3%. The average credit quality of the underlying holdings is B. In terms of sector exposures, the energy sector has the largest weighting at 15%, followed by consumer services 14%, telecommunications 13%, financials 12%, industrials 11%, health care 9%, consumer goods 7%, materials 7%, technology 6%, and utilities 5%. The fund’s effective duration is 4.12 years and its weighted average yield to maturity is 5.59%.

Investment Rationale/Risk: x While rising rates and inflation tend to be the enemy of typical

fixed-income securities, the high-yield bond asset class tends to outperform its fixed-income peers during such periods, due to its stock-like returns and heavier dependence on business fundamentals

x U.S. high-yield bonds have displayed extremely attractive risk-return characteristics, outperforming U.S. equities over the past decade with much smaller volatility

x Passive Investment Risk: the fund is not actively managed and BlackRock Fund Advisors (BFA) do not attempt to take defen-sive positions under any market conditions, including declining markets

x High Yield Securities Risk: securities that are rated below investment-grade may be deemed speculative and may be more volatile than higher-rated securities of similar maturity

iShares iBoxx $ High Yield Corporate Bond (HYG)



Analyst: Benjamin ShenkSector: High Dividend ETFExpenses: 0.35%Holding Return: 7.9%Morningstar Rating: ****








Energy 3.07

Financials 25.52

Health Care 6.69

Industrials 14.24


Materials 11.34


Utilities 10.80

TOP 5 HOLDINGS

AT & T Inc. 2.61%

HCP Inc. 2.13%

People’s United Financial Inc. 2.13%

Realty Income Corporation 2.11%

National Retail Properties Inc. 1.91%


Exchange Traded Fund (ETF) Overview:This ETF employs a sampling strategy wherein the fund is not re-quired to hold all securities in its underlying index, but does however hold at minimum 80% of the securities found in the index. Quantity of holdings is determined by management and is dependent upon several factors, including asset size. The fund seeks to track the per-formance of the S&P High Yield Dividend Aristocrats Index. This consists of the highest dividend yielding S&P Composite 1500® Index companies with a managed-dividends policy of consistently increasing dividends every year for a minimum of 20 consecutive years. Stocks have both capital growth, and dividend income characteristics, with weights indicated by yields.

Investment Rationale/Risk: x Stability of a diversified portfolio of predominately mid to large

cap companies

x Strict selection of companies with annually increasing dividends for 20+ years weeds out volatile or poor performing companies

x Passive approach to management provides benefits from diver-sification with lower management expenses

x Consistent, above average dividends provide a source of alternate income

x Defensive historical characteristics: the fund declined 23% vs the S&P 500’s 37% crash in 2008

x Research suggests that companies that consistently pay dividends outperform non-dividend paying companies by approximately 1.7% annualized returns

REWARD AND RISK SDY S&P 500

1-Year Return % 10.77% 11.57%

3-Year Annualized Return % 15.86% 16.11%


FUND DETAILS


Price to Book 2.74

Return on Equity % 21.47

SPDR® S&P Dividend ETF (NYSEArca: SDY)



Analyst: Benjamin ShenkSector: High Dividend ETFExpenses: 0.30%Holding Return: 15.8%Morningstar Rating: --








Energy 4.49

Financials 19.59

Health Care 6.59

Industrials 8.24


Materials 1.81


Utilities 19.56

TOP 5 HOLDINGS

AT & T Inc 3.02%

CenturyLink Inc 2.74%

Verizon Communications Inc 2.67%

CME Group Inc 2.56%

Kraft Foods Group Inc 2.54%

PowerShares S&P 500 High Dividend ETF (NYSEArca: SPHD)


Exchange Traded Fund (ETF) Overview:The PowerShares S&P 500 High Dividend ETF invests at least 90% of its assets in securities that comprise the S&P 500 Low Volatility High Dividend Index. This index is compiled and maintained by S&P Dow Jones Indices and is made up of 50 securities traded on the S&P 500 index that have historically provided high dividend yields and low volatility, with no single sector contributing more than 10 securities. The ETF is rebalanced semi-annually to ensure that its holdings reflect the underlying index.

Investment Rationale/Risk: x Stability of a diversified portfolio across sectors and market cap

size (mid to large)

x Fund is built around low volatility, potentially acting as a more defensive holding

x Passive approach to management provides benefit from diversi-fication with very low management expenses

x Consistent, above average dividends provide an alternative source of income

x Research suggests that companies that consistently pay dividends outperform non-dividend paying companies by approximately 1.7% annualized return, with the highest yielding 30% of the market

x Apart from inherent equity risks, this ETF offers no long term record of past performance for consideration

REWARD AND RISK SPHD S&P 500

1-Year Return % 15.83 11.57

3-Year Annualized Return % - 16.11

3-Year Sharpe Ratio - 1.61

FUND DETAILS


Price to Book 2.46

Return on Equity 23.39



Analyst: John Dickson Sector: Fixed Income Interest Rate Sensitivity: Subjectively Limited Credit Quality: Very High (Government)Assets Under Management: 20+ Year Treasuries, mostly 3.1-3.6%Expenses: 0.15%Holding Return: -0.1% Morning Star Rating: ****


Average Effective Duration 17.05 yrs

Average Credit Quality AA

12-Month Yield% 2.57

SEC Yield (YTM)% 2.43


U.S. Treasury 99.65%

Cash 0.35

REWARD AND RISK

2014 Return% 27.30

3-Year Annualized Return% 8.14


CREDIT QUALITY COMPARISON

AAA 100%


Exchange Traded Fund (ETF) Overview:The iShares 20+ Year Treasury Bond ETF tracks a market-weighted index of debt issued by the U.S. Treasury with remaining maturities of 20 years or more. TLT effectively captures the far end of the Treasury curve in an extremely liquid package. With a portfolio consisting entirely of debt with 20 years or more, trading volume is in the top 10 of all U.S.-listed ETFs. TLT can be very sensitive to long-term interest rate movements. It also charges a reasonable 15 bps and tracks its index well, making it a great choice for investors who want 20 to 30 year Treasury exposure.

Investment Rationale/Risk: x Unprecedented interest rate environment makes the question of

what rising rates will do to long term Treasuries more complicated (i.e., no historical comparison)

x In the last decade, long term rates have been uncorrelated to short term rate movements that were seen first in 2004-06 (“Treasury Risk Premia”)

x 10 year treasury yields have fallen .71% since the QEs began

x Fed owns $4.49 trillion in assets from QE and selling them could push LT interest rates

x Euro crisis will continue to drive Euro value down (possible negative interest rates) and overall global slump makes the U.S. the most attractive investment. Therefore, the increase in demand may smooth out impacts of interest rate hikes.

x Fed with the end of QE reduced debt issues at similar rate, trying to balance potential supply/demand problems

x Mortgage market has changed – Fed holds most outstanding mortgages from Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA)

iShares 20+ Year Treasury Bond (TLT)



Analyst: Colin Ward Sector: Fixed Income Interest Rate Sensitivity: LowCredit Quality: Very HighExpenses: 0.20%Holding Return: 0.20%Morning Star Rating: ***


Average Effective Duration 5.60

Average Credit Quality AA

TTM Yield % 2.35



Government Bonds 47.04%


Securitized 22.89%

Cash & Equivalents 5.56%

Municipal 0.75%

REWARD AND RISK

2014 Return % 5.76

3-Year Annualized Return % 2.92


AAA 69.87%

AA 4.20%

A 12.55%

BBB 13.38%

Current Price Net Asset Value (NAV) 52-Week RangeN/A $11.00 N/AAs of 4/6/2015

Exchange Traded Fund (ETF) Overview:The fund seeks to track the performance of a broad market weighted index, the Barclays U.S. Aggregate Float Adjusted Index. This Index represents a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States—including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities—all with maturities of more than one year. The Fund invests by sampling the Index, meaning that it holds a broadly diversified collection of securities. All of the Fund’s investments will be selected through the sampling process, and at least 80% of the Fund’s assets will be invested in bonds held in the Index.

Investment Rationale/Risk: x The average credit rating of its holdings is AA, which is higher

than its peers’ (BBB). This may help the fund hold up better during tough economic climates. It also leads to lower returns

x Credit risk, which is the chance that a bond issuer will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer’s ability to make such payments, will cause the price of that bond to decline; credit risk should be low for the Fund because it purchases only bonds that are of investment-grade quality

x Index sampling risk, which is the chance that the securities selected for the Fund will not provide investment performance ,matching that of the Fund’s target index. Index sampling risk for the Fund should be low

x Interest rate risk is the chance that bond prices will decline because of rising interest rates. Interest rate risk should be moderate for the Fund because it invests primarily in short- and intermediate-term bonds, whose prices are less sensitive to inter-est rate changes than are the prices of long-term bonds

Vanguard Total Bond Market Index Inv (VBMFX)



Analyst: Benjamin ShenkSector: High Dividend ETF Expenses: 0.10%Holding Return: 11.8%Morningstar Rating: *****








Energy 10.25

Financials 12.42

Health Care 11.18

Industrials 11.88


Materials 3.16


Utilities 7.40

TOP 5 HOLDINGS

Apple Inc. 8.47%

Exxon Mobile Corporation 4.24%

Microsoft Corp 3.66%

Wells Fargo & Co. 3.21%

Johnson & Johnson 3.19%


Exchange Traded Fund (ETF) Overview:The Vanguard High Dividend Yield ETF tracks the FTSE High Dividend Yield Index, which is effectively made up of large-cap value stocks, which together make up roughly 38% of the total market and has a higher than average dividend yield. VYM provides a convenient method of tracking the index through a diversified portfolio with a low expense ratio.

Investment Rationale/Risk: x Stability of a diversified portfolio of large-cap value stocks

x Passive approach to management allows investors to benefit from diversification with low management expenses

x Consistent, above average dividends provide a source of alterna-tive income

x Research suggests that companies with consistent dividend pay-ments outperform non-dividend paying companies by around 1.7% annualized return

REWARD AND RISK VYM S&P 500

1-Year Return % 10.17 11.57

3-Year Annualized Return % 15.46 16.11


FUND DETAILS


Price to Book 2.61

Return on Equity % 21.00

Vanguard High Dividend Yield ETF (NYSEArca: VYM)


Investment Management Program Portfolio2014 Performance

YTD Holding Security Ticker Shares Price Value Weight Shares Price Value Weight Return Return

Equity:3M MMM 25 140.25$ 3,506.25$ 2.86% 25 164.32$ 4,108.00$ 2.85% 17.2% 110.9%Abbott Labs ABT 40 38.33$ 1,533.20$ 1.25% 40 45.02$ 1,800.80$ 1.25% 17.5% 94.3%Accenture PLC Class A ACN 40 79.54$ 3,181.60$ 2.60% As of 04/16/2014 40 89.31$ 3,572.40$ 2.48% 12.3% 12.3%Air Products and Chemicals Inc. APD 10 111.78$ 1,117.80$ 0.91% 10 144.23$ 1,442.30$ 1.00% 29.0% 62.9%American Tower Corp. AMT 20 102.03$ 2,040.60$ 1.67% As of 12/2/2014 20 98.85$ 1,977.00$ 1.37% -3.1% -3.1%Amgen Inc. AMGN 15 161.85$ 2,427.75$ 1.98% As of 11/12/2014 15 159.29$ 2,389.35$ 1.66% -1.6% -1.6%Apple Inc. AAPL 6 561.02$ 3,366.12$ 2.75% 42 110.38$ 4,635.96$ 3.22% 37.7% 336.5%Cerner Corp. CERN 50 58.22$ 2,910.90$ 2.38% As of 10/7/2014 50 64.66$ 3,233.00$ 2.24% 11.1% 11.1%Chipotle CMG 3 670.05$ 2,010.15$ 1.64% As of 11/13/2014 3 684.51$ 2,053.53$ 1.42% 2.2% 2.2%Cisco Systems CSCO 120 22.43$ 2,691.60$ 2.20% 120 27.82$ 3,337.80$ 2.32% 24.0% 43.2%Coca-Cola Co. KO 70 41.31$ 2,891.70$ 2.36% 70 42.22$ 2,955.40$ 2.05% 2.2% 93.4%Danaher Corp DHR 60 77.20$ 4,632.00$ 3.78% 60 85.71$ 5,142.60$ 3.57% 11.0% 237.8%Discover Financial Services DFS 30 55.95$ 1,678.50$ 1.37% 30 65.49$ 1,964.70$ 1.36% 17.1% 161.9%ExxonMobil XOM 28 101.20$ 2,833.60$ 2.31% 28 92.45$ 2,588.60$ 1.80% -8.6% 9.7%FedEx Corp. FDX 15 143.77$ 2,156.55$ 1.76% 15 173.66$ 2,604.90$ 1.81% 20.8% 108.3%Gilead Sciences Inc GILD 40 75.14$ 3,005.60$ 2.46% As of 04/28/2014 40 94.26$ 3,770.40$ 2.62% 25.4% 25.4%Intel Corp INTC 140 25.96$ 3,633.70$ 2.97% 140 36.29$ 5,080.60$ 3.52% 39.8% 69.8%International Paper IP 35 54.81$ 1,918.35$ 1.57% As of 12/4/2014 35 53.58$ 1,875.30$ 1.30% -2.2% -2.2%Kinder Morgan, Inc. KMI 37 80.66$ 2,984.42$ 2.44% 81 42.31$ 3,427.11$ 2.38% 14.8% 15.4%Lowes Companies LOW 100 49.55$ 4,955.00$ 4.05% 100 68.80$ 6,880.00$ 4.77% 38.8% 180.5%Microsoft Corp. MSFT 75 37.41$ 2,805.75$ 2.29% 75 46.45$ 3,483.75$ 2.42% 24.2% 83.1%Novartis AG ADR NVS 65 80.38$ 5,224.70$ 4.27% 65 92.66$ 6,022.90$ 4.18% 15.3% 75.4%NXP Semiconductors NXPI 40 76.28$ 3,051.12$ 2.49% As of 11/25/2014 40 76.40$ 3,056.00$ 2.12% 0.2% 0.2%PetsMart Inc PETM 20 66.93$ 1,338.60$ 1.09% 20 81.30$ 1,625.90$ 1.13% 21.5% 22.4%Procter & Gamble Co PG 20 81.41$ 1,628.20$ 1.33% 20 91.09$ 1,821.80$ 1.26% 11.9% 47.3%Public Service Enterprise Group Inc. PEG 60 32.04$ 1,922.40$ 1.57% 60 41.41$ 2,484.60$ 1.72% 29.2% 25.4%Southwest Airlines LUV 30 37.84$ 1,135.08$ 0.93% As of11/6/2014 30 42.32$ 1,269.60$ 0.88% 11.9% 11.9%Toronto Dominion Bank TD 50 47.12$ 2,356.00$ 1.92% 50 47.78$ 2,389.00$ 1.66% 1.4% 14.8%UnitedHealth Group Inc UNH 60 75.30$ 4,518.00$ 3.69% 60 101.09$ 6,065.40$ 4.21% 34.2% 72.8%VF Corp VFC 25 68.43$ 1,710.75$ 1.40% As of 11/5/2014 25 74.90$ 1,872.50$ 1.30% 9.5% 9.5%Wells Fargo & Company WFC 30 49.10$ 1,473.00$ 1.20% As of 04/16/2014 30 54.82$ 1,644.60$ 1.14% 11.6% 11.6%Total 96,575.80$ 67.00%

High Dividend Yield ETF:

PowerShares S&P 500 High Div Port SPHD 178 28.36$ 5,048.08$ 4.12% 178 32.85$ 5,847.30$ 4.06% 15.8% 15.8%SPDR S&P Dividend SDY 34 72.62$ 2,469.08$ 2.02% 34 78.80$ 2,679.20$ 1.86% 8.5% 7.9%Vanguard High Dividend Yield VYM 81 62.32$ 5,047.92$ 4.12% 81 68.75$ 5,568.75$ 3.86% 10.3% 11.8%WisdomTree LargeCap Dividend Fund DLN 38 66.54$ 2,528.52$ 2.07% 38 74.16$ 2,818.08$ 1.96% 11.5% 13.7%Total 16,913.33$ 11.73%

Fixed-Income Securities and Others:

iShares iBoxx $ High Yield Corporate Bd ETF HYG 55 92.48$ 5,086.40$ 4.16% As of 11/12/2014 55 89.60$ 4,928.00$ 3.42% -3.1% -3.1%PowerShares Senior Loan BKLN 208 24.88$ 5,175.04$ 4.23% 208 24.03$ 4,998.24$ 3.47% -3.4% -3.1%iShares 20+ Year Treasury Bond TLT 15 126.00$ 1,890.00$ 1.54% As of 12/30/2014 15 125.92$ 1,888.80$ 1.31% -0.1% -0.1%Vanguard Bond Index Fund VBMFX 275 10.85$ 2,985.00$ 2.44% As of 12/30/2014 275 10.87$ 2,990.50$ 2.07% 0.2% 0.2%Total 14,805.54$ 10.27%

Sold# Shares Sale Price Purchase Price Sale Proceeds Cost Basis Gain/Loss Return

AbbVie Inc. ABBV 40 49.85$ 23.42$ 1,984.01$ 946.59$ 1,037.42$ 112.90%PowerShares Chinese Yuan Dim Sum Bond Portfolio DSUM 200 24.22$ 25.80$ 4,824.02$ 5,179.98$ (355.96)$ -6.12% $24.31 4,862.00$ Express Scripts ESRX 35 68.43$ 51.99$ 2,385.06$ 1,829.64$ 555.42$ 31.62% 84.67$ 2,963.45$ iShares Global ex USD High Yield Corporate Bond ETFHYXU 89 52.83$ 56.80$ 4,691.89$ 5,065.19$ (373.30)$ -6.99% 50.74$ 4,515.86$ Pet Smart Inc PETM 20 83.00$ 66.93$ 1,650.01$ 1,348.59$ 301.42$ 24.01% 81.29$ 1,625.80$ Verizon Wireless Communications VZ 76 49.06$ 27.79$ 3,718.57$ 2,122.03$ 1,596.54$ 76.54% 46.78$ 3,555.28$ Vulcan Materials Company VMC 35 64.65$ 45.12$ 2,252.90$ 1,589.19$ 663.71$ 43.29%Yum Brands YUM 54 73.16$ 28.86$ 3,940.70$ 1,568.43$ 2,372.27$ 153.50% $72.85 3,933.90$

5,797.53$ Actively Managed Totals 101,429.09$ 82.86% 128,294.67$ 89.01%

`Money Market 20,975.05$ 17.14% 15,845.11$ 10.99%Scholarship/Donation AccountPortfolio Value 122,404.14$ 100% 144,139.78$ 100% 14.39%

BenchmarksS&P 500 index change 1,848.36 2,058.90 11.39%S&P 500 dividend yield 2.30%S&P 500 total return 13.69%

Barclays US Aggregate Bond index 5.97%

Benchmark portfolio (80% the S&P 500 index + 20% the Barclays US Aggregate Bond index) 12.15%vs. the benchmark 2.24%

FTSE All-World Stock Index 2.17%

IPS Benchmark Portfolio (60% FTSE All-World Stock Index +40% the Barclays US Aggregate Bond index) 3.69%vs. the benchmark 10.70%

December 31, 2013 December 31, 2014

Summary Returns


Investment Management Program Portfolio Contributors

A proud member of Pennsylvania’s State System of Higher Education

Shippensburg University of Pennsylvania, in compliance with federal and state laws and university policy, is committed to human understanding and provides equal educational, employment, and economic opportunities for all persons without regard to age, color, national origin, race, religion, disability, veteran status, sex, sexual orientation, or gender identity. Direct requests for disability accommodations and other inquiries to the Office of Disability Services, Horton Hall Suite 324, Shippensburg University, 1871 Old Main Drive, Shippensburg, PA 17257-2299, (717) 477-1329, [email protected]. 5/15U-150

John L. Grove College of BusinessShippensburg University

1871 Old Main DriveShippensburg, PA 17257-2299

717-477-1435www.ship.edu/business

John L. Grove College of BusinessFinance Advisory Council 2014-2015

Donald Butler, CFA ’92, Vanguard Group

James A. DeGaetano, Jr., CFP, CPA, MBA ’99, First Command Financial Svcs., Inc.

Justin Ellsesser ’11, Lepercq Lynx Investment

Ralph J. Fetrow, CFP, Members 1st Federal Credit Union

Lee A. Gardella ’89, Adveq Management US, Inc.

Dr. Ralph T. Hocking, Professor Emeritus, SU Finance

Christopher J. Jackson ’97, PNC Wealth Mgt.

Anne E. Kingsborough ’01, PNC Financial Services Group

Mrs. Louise Lovell, Retired US Nuclear Regulatory Commission

Greg McMullen, Red Rock Investment Mgt., LLC

David Rosen ’91, Brean Capital

Jennifer L. Sassani ’93, Lehigh University

Christopher S. Weber ’03, Mid-Atlantic Utilities, Inc.

David C. Webster ’03, Conning

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