Ascendere Associates LLC

Actionable Long/Short Equity Research

Ascendere Model Portfolio Daily Update: March 7, 2014

There are limitations inherent in our backtested theoretical model results, particularly with the fact that such results do not represent actual trading and they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing client money at the time. Please see additional disclosures and disclaimers at the back of this report.

Purpose of this report This daily update is a supplement to a monthly report issued on February 28, 2014 that details the model portfolio strategies of Ascendere Associates LLC ("Ascendere"). The primary purpose of this report is to provide investors with updated buy and sell signals related to our model portfolio strategies ("New Actions Required" on page 2).

How we select stocks The stocks selected for our model portfolio strategies all rank highly for the following metrics, with an emphasis on proxies for cash flow growth and ROIC: Relative Value Operating Momentum Analyst Revision Momentum Fundamental Quality Investment styles and data points will fall in and out of favor over time, but stocks will always to a degree be beholden to the key tenets of valuation -- cash flow growth and ROIC.

Ascendere Associates LLC J. Stephen Castellano

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March 7, 2014 [email protected] www.ascenderellc.com

New Actions Required:

None.

Of Note:
See price target list.

Theoretical Model Portfolio* 03/07/14 Simple Returns (No Compounding) Stock Targets Core Model Long Short Core Long/Short Opportunistic Model Long Short Opportunistic Long/Short Opportunistic Model III Long Stocks Long Inverse ETF ^SH Opportunistic Long/Short III S&P 500 Index S&P 500 Total Return Index

MTD

YTD

Since 03/31/09

Sharpe

-0.44% 0.12% -0.56%

2.28% 1.48% 0.80%

3.54% -0.01% 3.55%

142.2% 86.0% 56.2%

1.09 0.76 0.60

Stock Targets and Portfolio Targets

-0.44% 0.00% -0.44%

1.59% 1.48% 0.11%

-1.79% -0.01% -1.78%

128.0% 37.4% 90.6%

1.29 0.31 1.10

Stock Targets and Portfolio Targets

-0.44% 0.00% -0.44% -0.60% #REF!

1.59% 1.42% 0.17% 1.01% 1.06%

-1.79% 0.39% -2.18% 1.74% 2.14%

128.0% 66.1% 62.0% 93.07% 103.69%

1.29 0.78 0.84 1.08 1.20

*Past performance is not a guarantee of future results. Results exclude accrued and paid dividends. Return figures are calculated using cumulative simple returns. This table represents returns of several theoretical portfolios that do not assume any costs.

This table is not to be construed as advertising for any investment service. Real portfolios that attempt to exactly replicate these theoretical strategies are guaranteed to generate lower returns relative to these models due to slippage, transaction costs, tax expenses and other costs. We do our best to provide accurate information, but do not guarantee this.

Ascendere Associates LLC J. Stephen Castellano

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March 7, 2014 [email protected] www.ascenderellc.com

Core & Opportunistic Long Model

2/28/2014 to 3/07/2014 Sector Industrials Health Care Consumer Staples Health Care Financials Financials Information Technology Financials Financials Information Technology Consumer Discretionary Industrials Information Technology Materials Healthcare Financials Financials Consumer Discretionary Financials Information Technology Industrials Energy Consumer Staples Energy Company American Airlines Group Inc. Align Technology Inc. Pilgrims Pride Corporation Parexel International Corp. Fifth Third Bancorp The Blackstone Group NXP Semiconductors NV Waddell & Reed Financial Inc. Protective Life Corp. Broadridge Financial Solutions Inc. DirecTV Group Inc. Lennox International Inc. Paychex Inc. Packaging Corp. of America Grifols, S.A. Nomura Holdings Inc. Omega Healthcare Investors Inc. Macy's, Inc. SEI Investments Co. Anixter International Inc. Flowserve Corp. Ultrapar Holdings Inc. Hansen Natural Corp. Oceaneering International, Inc.
Ticker

MTD
2/28/2014 36.93 52.33 17.53 53.57 21.70 33.35 56.23 69.70 52.14 37.76 77.60 91.88 41.76 72.89 42.08 6.79 31.96 57.86 33.57 106.95 81.21 22.30 74.00 71.58 3/7/2014 39.02 55.28 18.45 56.23 22.63 34.77 58.56 72.30 53.61 38.77 79.64 93.86 42.64 74.21 42.82 6.88 32.28 58.05 33.65 106.97 80.81 22.19 73.39 70.98 Performance 5.66% 5.64% 5.25% 4.97% 4.31% 4.26% 4.14% 3.73% 2.82% 2.67% 2.63% 2.15% 2.11% 1.81% 1.76% 1.33% 1.00% 0.33% 0.24% 0.02% -0.49% -0.49% -0.82% -0.84%

Theoretical Longs Stoppe

AAL ALGN PPC PRXL FITB BX NXPI WDR PL BR DTV LII PAYX PKG GRFS NMR OHI M SEIC AXE FLS UGP HANS OII

Price Target $ 45.79 $ 61.28 $ 19.99 $ 59.61 $ 23.18 $ 37.17 $ 64.70 $ 78.70 $ 57.78 $ 40.83 $ 84.15 $ 100.14 $ 45.02 $ 82.21 $ 47.31 $ 7.65 $ 34.84 $ 64.66 $ 37.03 $ 121.12 $ 90.35 $ 25.30 $ 82.60 $ 79.96

Stop Target None None None None None None None None None None None None None None None None None None None None None None None None

Ascendere Associates LLC J. Stephen Castellano

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March 7, 2014 [email protected] www.ascenderellc.com

Core & Opportunistic Short Model

2/28/2014 to 3/07/2014 Sector Energy Health Care Information Technology Consumer Discretionary Materials Energy Healthcare Financials Telecommunication Services Information Technology Financials Utilities Materials Consumer Discretionary Materials Consumer Discretionary Industrials Consumer Staples Information Technology Materials Materials Health Care Information Technology Company Peabody Energy Corp. BioMarin Pharmaceutical Inc. Qlik Technologies, Inc. Tempur Pedic International Inc. New Gold, Inc. Crosstex Energy LP Allscripts Healthcare Solutions, Inc. Plum Creek Timber Co. Inc. American Tower Corp. Yahoo! Inc. Royal Bank of Scotland Group plc TransAlta Corp. EI DuPont de Nemours & Co. Sears Holdings Corporation Carpenter Technology Corp. Jarden Corp. Armstrong World Industries, Inc. Molson Coors Brewing Company Tibco Software Inc. Eldorado Gold Corp. Allegheny Technologies Inc. InterMune Inc. MEMC Electronic Materials Inc.
Ticker

MTD
2/28/2014 17.56 81.00 30.50 51.87 6.11 30.89 18.57 43.29 81.47 38.67 10.96 11.52 66.62 44.75 59.15 61.47 54.89 56.83 21.79 6.66 31.78 30.04 18.36 3/7/2014 16.69 77.24 30.00 51.09 6.02 30.51 18.47 43.09 81.31 38.70 10.97 11.55 67.24 45.25 59.87 62.53 56.10 58.24 22.34 6.85 33.97 33.87 21.11 Performance -4.95% -4.64% -1.64% -1.50% -1.45% -1.23% -0.54% -0.46% -0.20% 0.08% 0.09% 0.26% 0.93% 1.12% 1.22% 1.72% 2.20% 2.48% 2.52% 2.85% 6.89% 12.75% 14.98% Price $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Target 16.00 73.95 27.19 47.10 5.35 28.56 16.83 41.10 77.16 34.96 9.94 10.71 63.15 37.47 55.61 56.76 49.54 54.08 19.74 5.83 28.72 11.18 15.41 Stop $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

Theoretica

BTU BMRN QLIK TPX NGD XTEX MDRX PCL AMT YHOO RBS TAC DD SHLD CRS JAH AWI TAP TIBX EGO ATI ITMN WFR

Target 19.12 88.05 33.81 56.64 6.87 33.22 20.31 45.48 85.78 42.38 11.98 12.33 70.09 52.03 62.69 66.18 60.24 59.58 23.84 7.49 34.84 48.90 21.31

Ascendere Associates LLC J. Stephen Castellano

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March 7, 2014 [email protected] www.ascenderellc.com

Core

Opportunistic

"Dollar Neutral" 1

"Dollar Neutral" 2

Inception March 31, 2009

Long , Stock Targets Theoretical 0.46% 2.28% 3.54% 142.18%

3/7/2014 Simple Returns Today MTD YTD Cumulative from 12/31/04 Absolute Risk Daily Average Daily Range Daily Standard Deviation Daily Return/Standard Deviation Average 90-Day T-bill Annualized Daily Returns Annualized Standard Deviation Sharpe Ratio Percentage Down Days Average Daily Downside Value Daily Downside Deviation Daily VAR of 1000 at 95% Conf Benchmark Relative Risk Correlation R-Squared Daily Tracking Error Regression Beta Daily Alpha Jensen's Daily Alpha Trading Days

Long, Stock and Portfolio Targets Theoretical 0.33% 1.59% -1.79% 128.03%

Long/Short, Stock Targets and Portfolio Targets Theoretical 0.83% 0.11% -1.78% 90.58%

Long, Stock and Portfolio Targets / Long ^SH ETF Theoretical 0.33% 0.80% -2.89% 61.51%

S&P 500 Total Return Index

0.06% 1.06% 2.14% 103.69%

0.12% 16.86% 1.62% 7.11% 1.53% 29.10% 25.8% 1.07 44.1% -1.18% -1.21% -25

0.11% 15.84% 1.22% 8.81% 1.53% 27.17% 19.4% 1.32 32.0% -1.03% -1.02% -19

0.08% 11.84% 0.98% 7.73% 1.53% 19.17% 15.6% 1.13 42.3% -0.65% -0.63% -15

0.05% 12.00% 0.88% 5.73% 1.53% 12.71% 14.0% 0.80 42.2% -0.59% -0.63% -14

0.08% 11.39% 1.12% 7.43% 1.53% 21.03% 17.8% 1.09 43.1% -0.82% -0.85% -17

0.91 0.84 0.73%

0.68 0.47 0.91%

(0.07) 0.00 1.51%

0.04 0.00 1.37%

1.32 0.031% 0.041% 1242

0.75 0.020% 0.015% 1242

-0.06 -0.011% 0.001% 1242

0.03 -0.034% -0.001% 1242

*Returns calculated by the simple return method (not compounded). * Portfolio models are theoretical and assume no costs. * Data collected in real time since 3/31/2009 Source: Ascendere Associates LLC

Ascendere Associates LLC J. Stephen Castellano

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March 7, 2014 [email protected] www.ascenderellc.com

Ascendere Associates LLC J. Stephen Castellano

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March 7, 2014 [email protected] www.ascenderellc.com

Ascendere Associates LLC J. Stephen Castellano

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March 7, 2014 [email protected] www.ascenderellc.com

DISCLOSURES Ascendere is in the business of providing equity research and related consulting services to investors and their advisors. The equity research it provides includes basic quantitative model portfolios and more detailed fundamental research with respect to individual stocks. In addition, the firm manages stock portfolios for itself and clients. Ascendere currently sources financial data from Capital IQ. Ascendere does not rate stocks on any scale, but does offer individual stock commentary and valuation opinions. With regard to Ascendere's portfolio strategies, "long" or "high-quality" baskets should generally be considered buys, unless otherwise noted. Stocks in our "short" or "low-quality" baskets should generally be considered sells, unless otherwise noted. While exceptions may occasionally occur, typically stocks in the high-quality basket are expected to outperform the S&P 500 over a month's time and stocks in the low-quality basket are expected to underperform. A more relevant benchmark would comprise of all stocks and ADRs that trade on major U.S. stock exchanges with a market cap above $2 billion. Ascendere adheres to professional standards and abides by codes of ethics that put the interests of clients ahead of its own. The following are specific disclosures made by Ascendere: 1) Ascendere may have a financial interest in the companies referred to in this report ("the Companies"). The research analyst covering the Companies and members of the analyst's immediate family have a financial interest in one or more of the Companies. 2) Ascendere generates revenue from research subscription revenue and portfolio management fees. At any given time it may be long or short any of the Companies. 3) Ascendere does not make a market in the securities of any of the Companies. 4) Ascendere has not received compensation from the Companies. 5) Ascendere has not managed or co-managed a public offering for any of the Companies. 6) Neither Ascendere nor any of its officers or any family member of the covering analyst serve as an officer, director or advisory board member of any of the Companies. 7) Neither Ascendere nor any of its officers or any family member of the covering analyst beneficially own 1% or more of any class of securities of any of the Companies.

DISCLAIMERS This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial instruments. The report is not intended to be in furtherance of the specific investment objectives, financial situation, or particular needs of any individual recipient. Investment decisions should be based on an individual's own goals, time horizon and tolerance for risk. The information contained herein accurately reflects the opinion of Ascendere at the time the report was released. The opinions of Ascendere are subject to change at any time without notice and without obligation or notification. The officers, affiliates or family members of Ascendere Associates may hold positions in the securities of the Companies. No warranty is made as to the accuracy of the information contained herein. The views and opinions expressed in the market commentary reflect the opinions of the author and may be based upon information obtained from third-party sources believed to be reliable but not guaranteed. These opinions are subject to change at any time based upon market or other conditions. Ascendere disclaims any responsibility to update such views. This information is intended for the sole use of clients of Ascendere. Any other use, distribution or reproduction is strictly prohibited. Investing in stocks includes a high degree of risk, including the risk of total loss. This is for informational purposes only and is not intended to constitute a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. All information, opinions and estimates are current as of original distribution by author and are subject to change at any time without notice. Any companies, securities and/or markets referenced are solely for illustrative purposes. Past performance is not indicative of future performance, and no representation or warranty, express or implied, is made regarding future performance. This report may contain forward-looking statements, which involve inherent risks and uncertainties, and we might not be able to achieve the predictions, forecasts, projections and other outcomes we may describe or imply. A number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions we express in these forwardlooking statements. We do not intend to update these forward-looking statements. For Investment Professional use only. NOT FOR FURTHER DISTRIBUTION. No part of this document may be reproduced in any way without the prior written consent of Ascendere Associates LLC.

Ascendere Associates LLC J. Stephen Castellano

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March 7, 2014 [email protected] www.ascenderellc.com