Model Portfolio Equity Income Overview

The Equity Income Model Portfolio combines a top-down sector approach with bottom-up stock selection to attempt to provide a diversified, large cap, Income-oriented, equity portfolio solution.

The model portfolio does not represent actual trading or holdings.

PORTFOLIO METHODOLOGY

• The Equity Income Model Portfolio is designed to produce long-term total return by combining current and growing dividends with appreciating share prices. The dividend yield of the model is expected to exceed the dividend yield of the S&P 500. There is no assurance the portfolio will meet its objectives.
• The portfolio will generally consist of 20 predominantly large capitalization stocks.
• The portfolio will seek broad diversification across most of the major economic sectors. A top-down investment approach to these broad sectors will be taken to determine the desired sector exposure of the portfolio. A bottom-up approach to stock selection will be applied thereafter.
• Although large capitalization dividend-paying stocks are often less volatile than the broad equity market, the limited number of stock positions may result in volatility equal to or somewhat above the broader U.S. equity market.

STOCK SELECTION PROCESS

1. TOP-DOWN SECTOR APPROACH: Determine what we believe are appropriate weightings for sector and subsector exposure within the portfolio.

2. BOTTOM-UP STOCK ANALYSIS: A bias toward large-cap companies with growing dividends will be employed. Fundamental research resources available to the Portfolio and Technical Strategy Group are utilized to aid in stock selection.

3. PORTFOLIO CONSTRUCTION: Select what we believe are the best stocks that fit into our desired subsectors and also complement each other in order to meet the portfolio’s Equity Income objective.