Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 1 steve@ascenderellc.com

Ascendere Associates LLC Innovative Long/Short Equity Research

Model Portfolio Monthly Update: July 31, 2015 There are limitations inherent in our 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. Please see additional disclaimers and disclosures at the back of this report. We highlight stocks that demonstrate solid growth at a reasonable price (GARP). 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

Page 2 contains rebalancing actions for our long-only model portfolio. Page 3 contains rebalancing actions for our short-only model portfolio. Target and stop prices, as well as updated return data, to be provided in our daily reports that will follow.

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 2 steve@ascenderellc.com

Commentary The Core model and Opportunistic model hold the same stocks and use the same stock-specific price targets, with the Opportunistic model portfolio occasionally moving to a 100% cash position during periods of extreme volatility. The Core long model portfolio declined 2.31% in the month, with 14 out of the 25 stocks in the model underperforming the +2.01% in the S&P 500. The Opportunistic long model portfolio increased 0.64% by avoiding the market for nearly the entire month. On June 29, market-wide volatility triggered a 20-day cash signal, so from June 30 to July 28 the model was assumed to hold 100% cash. The Opportunistic long model reentered the market with a 70% stock and 30% cash position on July 29, and will stay allocated this way for another 15 trading days. Losses in the model long portfolio were led by the disastrous EP Energy (EPE) -34.3%, China Life Insurance (LFC) -15.1% and Navient (NAVI) -13.8%. The best performing stocks in the long model included Amgen (AMGN) +11.7%, Manhattan Associates (MANH) +11.9%, and OReilly Automotive (ORLY) 5.4%, with each hitting their price targets on July 28, July 22, and July 29, respectively. The model short portfolios performed well, declining 3.23% during the month. As a result the Core long/short dollar neutral model returned 0.92% and the Opportunistic long/short model provided a theoretical return of 3.87%. Looking ahead 14 stocks are leaving the long only model, 11 stocks are being held, and 16 stocks will be added at prices assumed as of the July 31 close. Of the 16 new stocks, four of them particularly stand out: Cameron International (CAM), CBRE Group (CBG), PrivateBancorp, Inc. (PVTB), and NuVasive, Inc. (NUVA). Of these four, we would focus on CAM and NUVA because they are brand new entrants into our model portfolio, so there is a possibility that they have not received full attention from other portfolio managers yet. PVTB and CBG continue to look strong, but the shock value of suddenly being discovered by new investors is probably low. If we had to pick one stock idea to look at, it would be NUVA. These stocks stand out in our rankings because it appears that reported fundamentals are trending upward more slowly than upward consensus estimate revisions. In addition, they are trading at decent relative values, but not at a deep value, indicating perhaps they are

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 3 steve@ascenderellc.com

somewhat popular holdings that may catch fire at some point. Some other stocks that once fit this profile include Netflix (NFLX) in 2012 and Fossil (FOSL) in 2010. This is not to say our indicators our always prescient, but when stocks fit this particular ranking we do pay close attention. Also new to the list is Apple Inc. (AAPL), which our model has handled fairly well in the past. Southwest Airlines (LUV) is back on the list after a disappointing decline two months ago when it was replaced by the better performing JetBlue Airways (JBLU). While JetBlue is no longer part of the model portfolio, it still appears to be a very strong company it just missed the rankings by a negligible amount. We are not happy to see Robert Half International Inc. (RHI) as part of our model. I cannot think of one time in which this model has captured a solid run with RHI this might have to do with the fickle nature of the on-demand human resources business. Perhaps the same goes for ManpowerGroup Inc. (MAN) as well. Wayne Gretzky said it best skate to where the puck is going to be, not where it has been. Quantitative screens like the one in this report show where a stock has been and assume the trajectory is fixed. Of course, this is not always the case. The best investors will use this model portfolio as guidance, and not the end all. At the same time, the model does well enough on its own, often beating the indices with ease (though not this past month). With a little effort, we hope that active fundamental portfolio managers will do even better. I will give one example of how this screen can be enhanced, and how investors might use it to their advantage. Take a look at JetBlue Airways (JBLU). It missed the cut-off for our screens by a negligible amount. But if it does not appear on our screen, it probably does not appear on many others. Perhaps there is an opportunity here for investors that have the time to put in additional work.

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 4 steve@ascenderellc.com

Ranking Data as of July 31, 2015

JetBlue Airways CorporationNasdaqGS:JBLU

IndustrialsAirlines

Ascendere Ranking Price 08/02/15 22.98 Cash (915) EV/LTM EBITDA 7.3 Shares 315 Debt 2,033 Price/Book 2.7 Market Cap 7,234 Other (0)

5 = Best Rank Enterprise Value 8,352 Relative Value 4Operating Momentum 5 CY1 Consensus EPS Est. 1.84$ CY1 PE 12.5 Total Capital 4,891$ Analyst Revisions Mom 4 CY2 Consensus EPS Est. 2.06$ CY2 PE 11.2 Debt/Capital 24%Fundamental Quality 3 Latest Annualized Dividend -$ Div Yield 0.0% Debt/Enterprise Value 24%

Source: Ascendere Associates LLC and consensus estimates.

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 5 steve@ascenderellc.com

Long Model Portfolio -- Rebalancing Actions

7/31/2015 Rebalancing

Core and Opportunistic Long Portfolio:27 stocks in the model portfolio = 3.70% weight per position

Close Position Hold/Rebalance Open PositionIntercontinental Hotels Group plc IHG Tractor Supply Company TSCO The Interpublic Group of Companies, In IPGO'Reilly Automotive Inc. ORLY Cal-Maine Foods, Inc. CALM AutoNation, Inc. ANEP Energy Corporation EPE China Life Insurance Co. Ltd. LFC Cameron International Corporation CAMMGIC Investment Corp. MTG PrivateBancorp, Inc. PVTB Prudential plc PUKNavient Corporation NAVI CBRE Group, Inc. CBG Northern Trust Corporation NTRSAllianceBernstein Holding L.P. AB Centene Corp. CNC NuVasive, Inc. NUVAORIX Corporation IX Amgen Inc. AMGN China Biologic Products, Inc. CBPOWestern Alliance Bancorporation WAL General Dynamics Corporation GD Southwest Airlines Co. LUVJones Lang LaSalle Incorporated JLL Aspen Technology, Inc. AZPN Robert Half International Inc. RHIEast West Bancorp, Inc. EWBC Manhattan Associates, Inc. MANH ManpowerGroup Inc. MANCigna Corp. CI Lam Research Corporation LRCX PACCAR Inc. PCARSkyworks Solutions Inc. SWKS Electronic Arts Inc. EAFiserv, Inc. FISV Apple Inc. AAPLBroadcom Corp. BRCM IPG Photonics Corporation IPGP

Euronet Worldwide, Inc. EEFTSource: Ascendere Associates LLC LyondellBasell Industries N.V. LYB

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 6 steve@ascenderellc.com

Short Model Portfolio -- Rebalancing Actions When the market anticipates an improving economy from low price levels, low-quality stocks will at times out-perform high-quality stocks as the expected improvements in fundamentals are discounted from a relatively more depressed price level.

7/31/2015 Rebalancing

Core and Opportunistic Short Portfolio:26 stocks in the model portfolio = 3.85% weight per position

Close Position Hold/Rebalance Open Short SaleThe Priceline Group Inc. PCLN Amaya, Inc. AYA TripAdvisor Inc. TRIPNews Corporation NWSA NGL Energy Partners LP NGL Targa Resources Partners LP NGLSLions Gate Entertainment Corp. LGF Williams Companies, Inc. WMB Weatherford International plc WFTMelco Crown Entertainment LimitMPEL Vertex Pharmaceuticals IncorpoVRTX ConocoPhillips COPTarga Resources Corp. TRGP Cree, Inc. CREE Chevron Corporation CVXEnterprise Products Partners L.PEPD Alibaba Group Holding Limited BABA EnLink Midstream, LLC ENLCWestern Gas Equity Partners, LPWGP Autodesk, Inc. ADSK Alexion Pharmaceuticals, Inc. ALXNPhillips 66 Partners LP PSXP Yahoo! Inc. YHOO Seattle Genetics, Inc. SGENEnable Midstream Partners, LP ENBL SunEdison, Inc. SUNE Embraer SA ERJAlkermes plc ALKS Methanex Corporation MEOH ACI Worldwide, Inc. ACIWThe Manitowoc Company, Inc. MTW W.R. Grace & Co. GRA PTC Inc. PTCColfax Corporation CFX Akamai Technologies, Inc. AKAMLinkedIn Corporation LNKD First Solar, Inc. FSLR

Cavium, Inc. CAVMSource: Ascendere Associates LLC Crown Holdings Inc. CCK

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 7 steve@ascenderellc.com

Return Data

Core & Opportunistic Long Model MTD ped Out on 8/4/2011 close for a -12.33% loss6/30/2015 to 7/31/2015

Target/ Date+1 Sector Company Ticker 6/30/2015 7/31/2015 Performance Stop Date Sell Price ReturnHealth Care Amgen Inc. AMGN 153.52 176.59 15.03% 7/28/2015 171.47$ 11.69%Information Technology Manhattan Associates, Inc. MANH 59.65 64.82 8.67% 7/22/2015 66.77$ 11.94%Consumer Discretionary O'Reilly Automotive Inc. ORLY 225.98 240.31 6.34% 7/29/2015 238.15$ 5.39%Industrials General Dynamics Corp. GD 141.69 149.11 5.24%Information Technology Fiserv Inc. FISV 82.83 86.86 4.87%Financials Jones Lang Lasalle Inc. JLL 171.00 178.04 4.12%Financials Privatebancorp Inc. PVTB 39.82 41.34 3.82%Consumer Staples Cal-Maine Foods Inc. CALM 52.20 54.16 3.75%Consumer Discretionary Intercontinental Hotels Group plc IHG 40.46 41.83 3.39%Consumer Discretionary Tractor Supply Company TSCO 89.94 92.52 2.87%Financials CBRE Group, Inc. CBG 37.00 37.97 2.62%Financials Western Alliance Bancorporation WAL 33.76 33.83 0.21%Financials ORIX Corp. IX 74.52 74.55 0.04%Financials East West Bancorp Inc. EWBC 44.82 44.76 -0.13%Information Technology Broadcom Corp. BRCM 51.49 50.61 -1.71%Information Technology Aspen Technology, Inc. AZPN 45.55 44.38 -2.57%Financials MGIC Investment Corp. MTG 11.38 11.07 -2.72%Information Technology LAM Research Corp. LRCX 81.35 76.87 -5.51%Financials AllianceBernstein Holding L.P. AB 29.53 27.47 -6.98%Information Technology Skyworks Solutions Inc. SWKS 104.10 95.67 -8.10%Health Care CIGNA Corp. CI 162.00 144.06 -11.07%Health Care Centene Corp. CNC 80.40 70.13 -12.77%Financials Navient Corporation NAVI 18.21 15.70 -13.78%Financials China Life Insurance Co. Ltd. LFC 21.76 18.47 -15.12%Energy EP Energy Corporation EPE 12.73 8.37 -34.25%

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 8 steve@ascenderellc.com

Core & Opportunistic Short Model MTDal shorts hit target 8/4/2011 for 14.84% gain6/30/2015 to 7/31/2015

Target/ Date+1 Sector Company Ticker 6/30/2015 7/31/2015 Performance Stop Date Sell Price ReturnInformation Technology SunEdison, Inc. SUNE 29.91 23.28 -22.17% 7/27/2015 25.80$ -13.74%Materials Methanex Corp. MEOH 55.66 45.09 -18.99% 7/8/2015 45.09$ -18.99%Industrials Colfax Corporation CFX 46.15 38.14 -17.36% 7/10/2015 43.84$ -5.01%Energy Phillips 66 Partners LP PSXP 72.00 62.31 -13.46% 7/6/2015 67.83$ -5.79%Consumer Discretionary Amaya, Inc. AYA 27.39 24.33 -11.17% 7/30/2015 24.33$ -11.17%Industrials Manitowoc Co. Inc. MTW 19.60 17.67 -9.85% 7/10/2015 18.69$ -4.64%Energy NGL Energy Partners LP NGL 30.33 27.68 -8.74% 7/16/2015 27.51$ -9.30%Energy Williams Companies, Inc. WMB 57.39 52.48 -8.56%Information Technology Yahoo! Inc. YHOO 39.29 36.67 -6.67%Information Technology Cree Inc. CREE 26.03 24.65 -5.30%Energy Enterprise Products Partners LP EPD 29.89 28.33 -5.22% 7/22/2015 27.41$ -8.30%Information Technology Alibaba Group Holding Limited BABA 82.27 78.34 -4.78%Energy Cameco Corporation CCJ 14.28 13.73 -3.85% 7/17/2015 13.01$ -8.89%Energy Western Gas Equity Partners, LP WGP 60.00 58.66 -2.23%Information Technology LinkedIn Corporation LNKD 206.63 203.26 -1.63%Materials W.R. Grace & Co. GRA 100.30 100.93 0.63%Consumer Discretionary News Corporation NWSA 14.59 14.73 0.96%Information Technology Autodesk, Inc. ADSK 50.08 50.58 1.01%Energy Enable Midstream Partners, LP ENBL 15.98 16.36 2.38% 7/8/2015 14.78$ -7.51%Consumer Discretionary Melco Crown Entertainment Ltd. MPEL 19.63 20.63 5.09%Consumer Discretionary Lions Gate Entertainment Corp. LGF 37.05 39.18 5.75%Consumer Discretionary Priceline.com Inc. PCLN 1,151.37 1,243.57 8.01% 7/20/2015 1,235.20$ 7.28%Health Care Alkermes, Inc. ALKS 64.34 70.02 8.83%Health Care Vertex Pharmaceuticals Inc. VRTX 123.48 135.00 9.33%

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 9 steve@ascenderellc.com

* 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 will generate lower returns relative to these models due to slippage, transaction costs, tax expenses and other costs. There are limitations inherent in our theoretical 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. We do our best to provide accurate information, but do not guarantee this. Please see additional disclosures and disclaimers.

Theoretical Model Portfolio* 07/31/15 MTD YTDSince

03/31/09 SharpeSimple Returns (No Compounding)

Stock Targets Core ModelLong -0.44% -2.31% 9.40% 160.9% 1.04 Short 0.12% -3.23% 5.07% 78.5% 0.56 Core Long/Short -0.56% 0.92% 4.33% 82.4% 0.75

Stock Targets and Opportunistic ModelPortfolio Targets Long -0.44% 0.64% 11.90% 147.5% 1.23

Short 0.00% -3.23% 3.60% 23.1% 0.12 Opportunistic Long/Short -0.44% 3.87% 8.30% 124.4% 1.25

Stock Targets and Opportunistic Model IIIPortfolio Targets Long Stocks -0.44% 0.64% 11.90% 147.5% 1.23

Long Inverse ETF ^SH 0.00% -2.41% -5.12% -83.3% (1.04) Opportunistic Long/Short III -0.44% -1.77% 6.78% 64.2% 0.69

S&P 500 Index -0.60% 2.01% 2.58% 105.34% 1.02

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 10 steve@ascenderellc.com

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 11 steve@ascenderellc.com

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 12 steve@ascenderellc.com

Core Opportunistic"Dollar

Neutral" 1"Dollar

Neutral" 2

Inception March 31, 2009Long , Stock

Targets

Long, Stock and Portfolio Targets

Long/Short, Stock Targets and Portfolio

Targets

Long, Stock and Portfolio

Targets / Long ^SH ETF S&P 500

7/31/2015 Theoretical Theoretical Theoretical TheoreticalSimple ReturnsToday -0.22% -0.15% 0.48% -0.06% -0.23%MTD -2.31% 0.64% 3.87% -1.77% 2.13%YTD 9.40% 11.90% 8.30% 6.78% 3.72%Cumulative from 3/31/2009 160.85% 147.53% 124.43% 64.23% 118.74%

Absolute RiskDaily Average 0.10% 0.09% 0.08% 0.04% 0.07%Daily Range 16.86% 15.84% 11.84% 12.00% 11.40%Daily Standard Deviation 1.46% 1.13% 0.93% 0.81% 1.02%Daily Return/Standard Deviation 6.89% 8.19% 8.42% 4.98% 6.46%

Average 90-Day T-bill 1.33% 1.33% 1.33% 1.33% 1.33% Annualized Daily Returns 25.41% 23.31% 19.66% 10.15% 16.64% Annualized Standard Deviation 23.2% 17.9% 14.7% 12.8% 16.2%Sharpe Ratio 1.04 1.23 1.25 0.69 0.94

Percentage Down Days 44.9% 34.4% 43.0% 43.6% 44.3%Average Daily Downside Value -1.04% -0.91% -0.62% -0.54% -0.74%Daily Downside Deviation -1.10% -0.92% -0.59% -0.57% -0.78%Daily VAR of 1000 at 95% Conf -23 -18 -14 -13 -16

Benchmark Relative RiskCorrelation 0.90 0.69 (0.05) 0.04R-Squared 0.82 0.48 0.00 0.00Daily Tracking Error 0.70% 0.85% 1.42% 1.28%

RegressionBeta 1.29 0.77 -0.05 0.03Daily Alpha 0.035% 0.026% 0.012% -0.026%Jensen's Daily Alpha 0.045% 0.020% -0.001% -0.001%

Trading Days 1595 1595 1595 1595*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 July 31, 2015 J. Stephen Castellano Page 13 steve@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 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. For Investment Professional use only. NOT FOR FURTHER DISTRIBUTION. Any dissemination or copying of this commentary is strictly prohibited.

Ascendere Associates LLC July 31, 2015 J. Stephen Castellano Page 14 steve@ascenderellc.com

J. Stephen Castellano founded Ascendere Associates LLC to provide innovative equity research and investment advisory services that blends fundamental and quantitative approaches. In general, our approach is quite simple -- we believe that return on invested capital and long-term earnings growth are key to stock valuation. More specifically, we use powerful and unique financial models that combine publicly available data, consensus estimates and our own inputs to generate consistent and actionable stock recommendations.

Among the services that Ascendere provides are: 1) detailed custom equity research analysis; 2) valuation scenario analysis studies; 3) supply /demand studies; 4) long and short stock idea generation; 5) portfolio feedback; 6) detailed fundamental financial modeling services; and 7) additional analytical consulting services. Additional information is available at www.ascenderellc.com. Mr. Castellano has over 15 years of experience in equity research and related consulting work. At PaineWebber, Warburg Dillon Read and Credit Lyonnais Securities he developed fundamental equity valuation models and conducted in-depth research on the steel and telecom services industries. At Boston Private Value Investors, he developed quantitative models for stock idea generation and also provided general fundamental equity research coverage. Steve received a MBA from the F. W. Olin School of Business at Babson College (2005) and a BA from Oberlin College (1993). Mr. Castellano's career history is highlighted below:

Ascendere Associates, LLC (2009-Present) Boston Private Value Investors , Equity Research, Equity Research Analyst (2005-2009) Pyramid Research, Contract Consultant, Telecom Services (2002-2003) Credit Lyonnais Securities (USA), Equity Research, Telecom Services, Vice President (2000-2001) Warburg Dillon Read, Equity Research, Telecom Services, Research Associate (1999-2000) PaineWebber, Equity Research, Steel and Nonferrous Metals, Research Associate, Editor (1995-1999)