Equity Income Plus 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 dividend yield of the model is expected to exceed the dividend yield of the S&P 500 and deliver higher amounts of current income as well as long-term total return. This model is designed to produce long-term total return by combining current and growing dividends with appreciating share prices. There is no assurance the portfolio will meet its objectives.
• The portfolio will generally consist of 28 stocks. Twenty stocks will be predominantly large capitalization companies, which currently pay dividends. Eight positions will be currently higher yielding securities from areas of the market often associated with above-average dividend yields, such as master limited partnerships (MLPs), real estate investment trusts (REITs) and currently higher yielding C-corporations. The capitalization of the eight positions will generally be smaller than the other 20 stocks and will potentially carry higher business and financial risk. They will also likely be more volatile due to less trading volume.
• 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.
• The inclusion of the eight currently higher yielding equities is expected to create more volatility than the general broad 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: Fundamental research resources available to the Portfolio and Technical Strategy Group are utilized to aid in stock selection. We will maintain an income-oriented bias to stock selection, favoring companies that we believe have the ability to consistently increase their dividends over time.

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.