1st Quarter, 2007

An unprecedented boom in completed, announced and rumored private equity financed takeovers of publicly traded companies has captivated the minds of investors. Thomson Financial reported, that through the middle of May, worldwide merger and acquisition takeovers announced this year amounted to $2 trillion. The increasing number, frequency, and size of these takeovers understandably diverts traders’ attention from speculating on investors’ reactions to quarterly earnings reports toward trying to identify probable takeover candidates. Their changed mindset resulted in the good, or even excellent, earnings reports for your companies attracting little buying interest. The few stocks reporting good post-earning price gains are almost exclusively confined to those companies in the midst of executing sizeable stock buyback programs. This makes us think we should provide you with some figures to quantify what is happening in the markets. The numbers are the most current available from reliable sources that we could access.

During the first quarter of this year, the funds available for investment in private equity grew $88 billion to almost $1.4 trillion, while hedge funds experienced an inflow of $60 billion boosting their assets to $1.5 trillion. To give you a perspective on these numbers, US equity mutual fund assets at the end of March were $6 trillion. Few of these funds can leverage their assets, whereas, the leverage rate for the vast majority of hedge and private equity funds is no less than 4 to 1. The overwhelming preponderance of the new money invested in private equity and hedge funds came from endowments and public pension funds, according to statistics available from Private Equity Intelligence and Hedge Fund Research. Over the first four months of this year, Dealogics’ published data shows private equity funds investing $275 billion to consummate almost 1200 takeovers. The amounts invested directly were augmented by most of the $310 billion of marketable corporate debt sold by leveraged issuers over the past five and a half months. Lehman Brothers observes that much of this marketable debt is a variant of the formerly discredited payment-in-kind debentures issued to finance the late stage 1980 and early 1990 LBO deals. We expect aggressive institutional investors’ eager participation in financing these takeovers will persist until a large deal on which every buyout boom enthusiast has bet, fails to close. In the meantime, the observation of the oft-quoted anonymous sage rings true, “No banker was ever promoted for turning down a deal.”

State Street Corporation

State Street reported good first quarter earnings of 93¢ per share, 10.7% above the 84¢ it earned a year ago. For the tenth consecutive quarter, State Street’s attention to cost control delivered positive operating leverage as expense growth was contained to 10.7% and revenue grew 11.3%. Assets under custody grew to $12.3 trillion at quarter end. State Street earns 51% of its profits from its non-US business, which generates 43% of revenues. It is twice as profitable and growing 2 ½ times faster than its US business. Over the past four years, State Street’s revenues in Europe and Asia have grown at 30% and 27% respectively, twice the percentage increase in institutionally managed assets in these regions.

The slight rise in State Street’s stock price after its earnings announcement and its 8% rise since mid-March brings it up to its price at the start of the year, which indicates institutional investors’ lack of enthusiasm for State Street’s pending acquisition of Investors Financial. The dilution of State Street’s earnings growth for this year and next caused by issuing stock for the acquisition may be the reason for the tepid response, but another concern is the reduction in the combined company’s non-US revenues brought by the addition of Investor’s US centric business. After the acquisition, State Street will derive 61% of its revenues from US customers. We know, as other investors must, that State Street management’s reason for the acquisition was not just to add profitable revenues by cutting costs 50% while retaining 90% of the customer assets but also to secure international business from the large customers who encouraged Investors to undertake the initial steps toward an expensive expansion into Europe to serve their needs. The acquisition is scheduled to close at the end of July. State Street will then commence a $1 billion stock buy back, which will reduce the post acquisition share count by 3%. We expect that State Street will integrate Investor’s client service personnel and customer accounts crisply, smoothly and faster than the scheduled eighteen-month period. We expect that State Street’s negotiations to retain Investor’s clients will result in some announced new contracts to provide service in Europe. The stock remains inexpensive.

Express Scripts, Inc.

Express Scripts reported another strong quarter with earnings per share rising 49% to $1.04. The generic fill rate climbed above 60% for the first time as a result of the company’s success in convincing its clients to institute step-therapy programs that encouraged their members to use generic statins where medically appropriate. Lower retail and mail drug purchasing costs also contributed to record gross profit and EBITDA per claim of $3.26 and $2.11 respectively, increases of 28% and 36% from the same period last year. These results, along with an increase in the 2007 earnings per share forecast of 15¢ with a potential additional upside of 14 – 16¢ sent the stock price up 9% the day they were announced and analysts incorporated these results and forecasts into their statistical models. Express Scripts repurchased over 8 million shares at an average price of $95 in May. The stock price reached a new all-time high of $100 on May 24. Express Scripts’ stock price is up 38% since the beginning of the year.

Chicago Mercantile Exchange

The Chicago Merc’s strong first quarter results were ignored by investors who instead focused on the valuation of CME’s agreed upon merger with the Chicago Board of Trade (CBOT) compared to the value of an unsolicited proposal by the Intercontinental Exchange (ICE). During the quarter, CME’s average daily volume of futures and options traded rose 30% to 6.45 million contracts. Revenues and earnings increased 32% and 41% respectively to $332 million and $3.69 per share. CME’s operating margin was a record 60%, up from 55% on year ago.

On March 15, ICE made an unsolicited offer to the CBOT to combine the two companies in a stock for stock transaction. The offer, reminiscent of AOL’s deal for Time Warner in 2000, is made possible because ICE’s stock price has soared. It sells for 26 times revenues making its offer 10% higher than CME’s agreed upon price for the CBOT. ICE was formed in 2000 with the backing of Goldman Sachs and Morgan Stanley, who fear the CME’s encroachment upon their lucrative over-the-counter derivatives markets.

On May 11, the CME raised its offer price by 16%, increasing the exchange ratio from .30 shares of CME stock per CBOT share to .35. An added incentive is a commitment from the CME to conduct a fixed price tender offer at $560 a share for 12% of the stock outstanding after the merger which it hopes to close promptly after the scheduled July 9 shareholder vote. While the sweetened terms of the revised merger agreement are more favorable to CBOT shareholders, enough savings are realizable from the combination to make it beneficial for CME shareholders. CME’s stock is up 1% since the start of the year.

Automatic Data Processing

ADP’s fiscal third quarter revenues rose 14% to $2.2 billion and its earnings rose 20% to 65¢ per share. These results exclude the operations of Broadridge Financial, ADP’s brokerage services business which was spun-off during the quarter. Shareholders received a tax-free distribution of one share of Broadridge for every four shares of ADP on March 31. Broadridge paid ADP a $690 million dividend in connection with the spin-off which the company is utilizing to buy back stock.

ADP’s highly profitable core payroll revenues increased 8% while add-on services rose 23% during the quarter. All of ADP’s key financial metrics were strong. The number of employees on each client’s payroll, also an indicator of strength in the overall economy since ADP pays one in six non-government workers, accelerated to 3.0%, from 1.7% during the previous quarter. Worldwide new business sales growth was 12% and average client balances rose 8.3% to $17.6 billion. Dealer services division revenues rose 14% and delivered 100 basis points of pretax margin expansion during the quarter. We know ADP managers are skilled at executing their business plans, delivering operating leverage and producing good results for shareholders. ADP shares are up 11% since the beginning of the year.

C.H. Robinson Worldwide Inc.

CH Robinson continues to execute. During the quarter, Robinson’s gross profits rose 16% to $297 million and earnings of 42¢ per share rose 27% from a year ago. The total value of transportation services provided to its customers was $1.6 billion, up 8%, twice the rate of growth achieved in the first quarter. This was comprised entirely of volume growth because carrier rates and fuel costs were flat. Growth accelerated in March from January’s and February’s level. Gross profits from the core trucking business rose 17% while global forwarding profits rose 20%. Even Intermodal profits rose 18% despite flat volumes as the length of haul per shipment lengthened, providing Robinson with greater profit opportunities. Robinson’s sourcing of fruits and vegetables and fuel card transaction services businesses increased 7% and 8% respectively. Robinson’s shares have risen 25% since the start of the year.

Donaldson Company, Inc.

Donaldson’s diversified portfolio of air filtration businesses delivered 13% sales growth in its fiscal third quarter. Engine Products sales rose 30% in Europe and 16% in Asia, more than offsetting the $10 million decline in Donaldson’s North American truck filter business. More stringent EPA regulations on emissions from diesel engines that went into effect on January 1 reduced builds of tractors for eighteen wheel trucks from 70,000 in the previous quarter to 48,000 this quarter. Industrial Products sales rose 21% with Gas Turbine filtration systems’ sales up 57%. Reported earnings per share rose 14% to 49¢, but include about 10¢ from one-time tax benefits and 2¢ from the reduced share count. Along with reduced pre-tax profitability, Donaldson’s businesses uncharacteristically failed to generate free cash flow because of investments in its US after-market filter distribution business. These disappointing results sent the stock price down 7% today, leaving it up 4% since the beginning of the year.

EnCana Corp.

EnCana’s strong first quarter operating earnings of $1.10 per share were 38% higher than the 80¢ reported for the year ago quarter. The quarterly percentage change is enlarged by stock repurchases throughout the past year which reduced the average number of shares outstanding by 9.8%. During the quarter EnCana bought back 3% of its shares at an average price of $46.90. It has stated its intent to purchase an additional 2% of its shares before year-end.

EnCana’s results attest to its sensible management of its North American oil and gas producing assets. The quarterly results provided evidence of the financial benefit secured from the company’s oilsands—heavy oil refining joint venture with Conoco-Phillips. The contribution of 50% of EnCana’s oilsands production to the joint venture on January 2, 2007 reduced its share of the oil produced to 45% below last year’s. Meanwhile, its share in the refining profit resulted in a consolidated contribution to operating profit three times higher than the profit obtained from sole ownership of the oilsands a year ago. During the quarter, EnCana’s prudent use of natural gas hedges served to insulate the Company’s profits from US and Canadian gas production from wildly fluctuating gas prices. The gains realized on these hedges allowed EnCana to book a 32% revenue increase on a 2% rise in average daily production to 3.4 million cubic feet during the quarter. Absent this price protection earnings would have declined. EnCana has hedges in place covering 50% of its gas production for the remainder of the year and is acquiring hedges to cover 50% of its planned output for next year. At its current price of 60, EnCana’s stock price has risen 13% since it announced earnings on April 25. It’s up 33% since the start of the year when it was selling at 46.


Amdocs reported fiscal second quarter revenues of $706 million, up 18% from the same period last year. Earnings per share rose 8% to 41¢. The company announced the signing of a large managed services contract with AT&T, its oldest and largest U.S. client. Amdocs will support AT&T’s legacy ordering system for wholesale telephone service. This deal is one of the first to outsource the management of an in-house billing system and confirms Amdocs’ 20–year record of successfully managing complex projects. Amdocs also built and manages AT&T’s billing system for all of the services it will provide over its new optical fiber network. AT&T currently offers television channels over the internet (IP TV) in certain markets. AT&T expects to expand this service to more markets and to offer telephone service over this network by the end of the year. Amdocs’ stock price has risen 6% since May 18 as the potential of AT&T’s IP-based services becomes clearer. The company’s stock price is 2% below where it was on January 1.

NeuStar, Inc.

NeuStar’s revenues grew 28% during the quarter to $97.4 million, but earnings per share declined 1¢ from the year ago period to 23¢. Earnings on an adjusted basis, which excludes non-cash charges for stock-based compensation and amortization of intangibles resulting from acquisitions equaled 28¢, up from 26¢ on the same basis a year ago. Expenses from the company’s $139 million cash acquisition of Followap in November, reduced earnings by 7¢ per share.

Followap is developing a new European mobile instant messaging platform and has signed up 26 mobile network operators with nearly 300 million subscribers, including Vodafone their largest customer. The scope of this complex undertaking has expanded since the acquisition by NeuStar, which is resulting in greater expense and capital expenditure for 2007, and will delay meaningful revenues until 2008. During the first quarter, NeuStar recognized only $0.5 million in revenues and deferred $4.1 million. The uncertainty regarding the cost and timeframe to implement this promising service has resulted in NeuStar stock’s 11% decline since the start of the year. We think the company will provide investors with more details of the costs involved and the cash payments they will receive from their large mobile network operators who are eager to implement this improved money-making messaging solution. NeuStar’s core business is strong and profitable enough to provide shareholders with satisfactory results until the new service ramps next year.

Johnson & Johnson

Johnson & Johnson reported first quarter revenues of $15.0 billion, an increase of 13.3% in local currencies over the first quarter of 2006. Revenue growth was 6.3% when sales from Pfizer Consumer Health (PCH) are included in both periods. Earnings per share for the quarter rose 17.2% to $1.16 excluding one-time items. The company delivered strong earnings growth in spite of a 15% decline in revenues for Cordis, J&J’s cardiac device business, which produces the drug eluting stents. The other Medical Devices and Diagnostics’ businesses performed well, contributing to total revenue growth of 3.7% with Cordis accounting for 17% of the division’s sales. The pharmaceutical business posted a strong quarter with sales up 8.6%. Procrit/Eprex revenues rose 2% over the same period a year ago as the company executed its plans to increase sales in the retail and hospital markets.

The PCH business increased first quarter sales in Johnson & Johnson’s consumer business by 46%. Revenue grew 7% when sales from PCH are included in both periods. Sales from the oral care and over-the-counter drug businesses grew 11% and 9% respectively, both gaining market share in their categories. The integration of this $16.6 billion business is proceeding on schedule. Johnson & Johnson has met all major milestones, including systems integration, supply chain optimization and organizational changes, with no interruption in the business. These early results indicate that Johnson & Johnson will build and improve the profitability of these businesses as they did for Aveeno and Neutrogena.

Johnson & Johnson’s stock price is down 4.3% since January 1, although it has risen 5% since mid-March. The stock price fluctuated narrowly depending upon traders reaction to news about the company’s products. They sold shares on hearing of the possibility of more restrictions in Procrit use and disappointing clinical data for a new drug eluting stent developed by recently acquired Conor MedSystems. They bought shares on news of the successful defense of the patent of proton pump inhibitor Aciphex and the filing of a new drug application for an antibiotic to treat complicated skin infections from drug resistant bacteria.

Stryker Corporation

Stryker reported first quarter revenues of $1.5 billion, an increase of 10.9% in local currencies over the same period last year. Earnings per share rose 20.4% to 59¢. Higher domestic shipments of Othopaedic Implants and MedSurg Equipment lifted U.S. revenues 12.6% to $977.0 million. International sales rose 7.7% to $512.3 million as strong sales growth in Europe and Asia-Pacific offset the expected double-digit decline in revenues from Japan. Stryker plans to increase its new product flow to Japan to offset the impact of government-mandated price declines for currently marketed products. The company expects to launch two new products during the second half of the year that will expand its hip and endoscopy markets. The launch of OP-1, Stryker’s bone growth biologic, has been delayed at least one year because of an FDA request for additional data. Stryker remains confident of OP-1’s efficacy and safety, but will need to provide better data to convince the FDA. A 90 basis point improvement in gross margin for the quarter will help fund research and development programs for OP-1 and the rest of the growing product pipeline. Stryker’s stock price has risen 21% since January 1.

Varian Medical Systems, Inc.

News of an unexpected 10% decline in Oncology Systems orders during Varian Medical Systems’ fiscal third quarter sent its stock price down 7% on April 12. The stock price plunged another 7% on April 26 when the company lowered its fiscal year 2007 revenue growth forecast to 8%. Varian’s stock price has dropped 14% since the start of the year.

Revenues for the quarter rose 7% to $443 million while earnings per share rose 12% to 46¢. Demand for Varian’s most technologically advanced systems remains robust. Sales of radiation therapy systems valued at $2 million or more increased 30% during the quarter. Over 70% of the systems installed included the on-board-imager for Image-guided Radiation Therapy compared with 35% last year. The versatile Trilogy radiosurgery machine continues to gain market acceptance with more than 100 machines installed at the end of the quarter, twice the number last year. Oncology systems’ third quarter revenues were lower than expected because all of these advanced installations required greater site preparation and longer construction cycles.

The company’s emerging businesses, flat-panel detectors for filmless X-ray imaging, X-ray sources for cargo screening systems and the newly acquired ACCEL proton therapy systems, added 10% to net order growth for the quarter. The $21 million cash acquisition of Bio-Imaging Research will strengthen Varian’s security products business. Combining Bio-Imaging Research’s advanced X-ray imaging detectors and image processing software with Varian’s X-ray sources give Varian the opportunity to offer its customers a complete imaging system rather than just the X-ray source.

Walgreen Company

Walgreen reported excellent fiscal second quarter results with earnings per share rising 24.5% to 65¢ and revenues growing 14.6% to $13.9 billion over the same period a year ago. Increased sales of generic drugs and of more profitable general merchandise such as digital photos and private label European beauty products contributed to pharmacy and front-end sales growth of 10.9% and 5.7% respectively in stores open more than one year. Sales of generic drugs that have been on the market less than one year depressed pharmacy sales growth by 3.6% during the quarter. Investor concerns about the impact of industry issues such as the CVS/Caremark merger and Walmart’s discounted prescriptions continue to weigh on the stock price, which is down 2% since the start of the year.

Patterson Companies, Inc.

Patterson Companies reported satisfactory fiscal fourth quarter earnings of 44¢ per share, 6% higher than the year ago quarter. Sales rose an unexceptional 6%. The stock price, thereupon, rose 7% to a fraction above 37 and is now up 5% since the beginning of the year.

All the financial ratios for the quarter indicate the company is achieving the same steady progress it recorded in the previous quarter. The operating margin as a percentage of net sales improved two tenths of one percent from the fiscal third quarter; however, it was not enough to lift the margin for the fiscal year 2007 above fiscal 2006. During the quarter Patterson’s operating divisions achieved no acceleration in sales growth over that realized in the prior quarter.

Patterson’s stock moved up because management delivered confirmation that dentist demand for the newly upgraded CEREC chairside tooth restorative system exceeds available supply and is concentrated on the more expensive version. Improved software cuts training time to half a day from two. In mid-2005 Patterson paid $100 million to extend its exclusive right to distribute CEREC in the US until October 2017. Since the extension, sales have proven consistently disappointing as dentists waited for a system with the capabilities the new CEREC delivers. Rising profits from CEREC sales were the vital ingredient in keeping Patterson’s earnings growth above 20% for four years in succession. This helped propel the stock price to a high of 54 in May 2005. Evidently some investors hope for a reprise.

Merck & Company, Inc.

Merck’s new products and Singulair, the most prescribed respiratory drug worldwide, contributed to the company’s first quarter revenues of $5.8 billion, an increase of 7% over the first quarter of 2006 when sales for Zocor accelerated in advance of its patent expiration in June 2006. Sales of Singulair rose 25% during the quarter to $1 billion, while sales of the cholesterol-lowering drugs Vytorin and Zetia rose 47% to $1.2 billion. Januvia, Merck’s new diabetes drug posted strong sales of $87 million during the quarter. Earnings per share rose 8% to 84¢. The company’s stock price leapt 8% on April 13 when a Texas court dismissed an investor class action suit regarding Vioxx. Merck’s stock price has risen 23% since January 1.

PepsiCo, Inc.

PepsiCo demonstrated the strength of its portfolio of businesses in the first quarter of 2007. Revenues rose 9% to $7.4 billion. Lower corporate expenses, and share repurchases contributed to the 17% growth in the quarter’s earnings per share to 65¢. Frito Lay’s investment in a full redesign of the $1.5 billion Doritos brand continues to deliver strong growth with revenues up 14% during the quarter. Gamesa, the Mexican snack business and one of PepsiCo’s three largest international businesses, reported double-digit volume growth. While sales of carbonated soft drinks declined during the quarter, revenues of new non-carbonated drink businesses such as Lipton Teas and energy drinks rose over 40% from the same period last year. New products such as Lipton Pure Leaf and all-natural SoBe Essentials contributed to this growth. PepsiCo’s stock price is up 10% since January 1.

Rockwell Automation

Rockwell Automation’s fiscal second quarter earnings from continuing operations were 87¢ per share compared to 84¢ earned in last year’s second quarter. This quarterly result includes 5¢ per share of profit from owning its Power System division for one month before its sale to Baldor Electric for cash of $1.7 billion plus $100 million in stock. The transaction closed on January 31. The realized gain from the sale was $603 million equal to $3.68 per share. During the quarter Rockwell spent $515 million to buy back 8.3 million shares, 5% of the outstanding shares, at $62 a share.

Quarterly sales from Rockwell’s continuing operations were 8% higher than sales in the year ago quarter and 5% above the previous quarter’s. Strong 35% growth in Europe, which provided 22% of sales, more than compensated for a lack of growth among US customers who account for 54% of total company sales. Pharmaceutical customers worldwide, whose purchases rose 20% during the quarter, constituted the single strongest industry segment. These good results achieved in the midst of a profound transformation of the business attests to the strength of Rockwell’s products, its customers’ loyalty and management’s focus on execution even as it realigns its administrative structure, reconfigures its supply chain and completes implementation of a SAP enterprise resource management software installation. Amid all the changes during the quarter, James Gelly, the CFO since 2004 who was deeply involved in the Power Systems Division sale announced his retirement. The news knocked the stock down 5%, undoubtedly, because traders rightly reasoned the company could not be readily taken over by private equity buyers without a knowledgeable CFO to handle the transaction. Rockwell’s stock price is up 8% since the beginning of the year.

Intuit Inc.

Intuit’s fiscal third quarter revenue increased 21% to $1.2 billion and its earnings rose 24% to $1.04 per share. Despite concerns from investors and speculators regarding sales results of TurboTax, Consumer Tax revenue rose 14% as web-based Turbo Tax units rose 21% during the quarter. Revenues from Small Business rose 15%, driven by a 22% increase in QuickBooks and steady growth in Payroll & Payments. Following the acquisition of Digital Insight, Intuit reported $65 million in Financial Institutions revenue during the quarter. Digital Insight’s Internet Banking end-user customers reached 7.8 million, up 17%, while Bill Pay customers of 2.0 million rose 26%. Intuit’s stock leapt 14% on the first trading day following announcement of these good results. The stock price is back to where it was at the start of the year.

Intel Corp.

Intel’s stock price has risen 9% since the beginning of the year and is up 16% since mid-March. Strong demand for Intel’s energy-efficient multi-core microprocessors, which deliver more computing power per watt, enabled the company to maintain price levels in a competitive environment. Intel sees significant opportunities for growth in its core markets as it introduces a steady stream of new products with increasing performance-to-power ratios. The company estimates that 460 million PCs currently connected to the internet are more than three years old and will be replaced to access video and other internet content. Notebook computers contain more Intel components than desktops. Intel estimates that revenue will increase $100 million for each percentage point increase of notebook’s share of the installed base. The May 22 announcement of the sale of the company’s flash memory assets to a new company formed with similar assets from the Dutch company STMicroelectronics increased investor confidence that Intel will continue to shed non-performing businesses. Revenues for the first quarter were the same as those reported one year ago, while earnings per share rose 1¢ to 24¢.

Western Union

During the first quarter Western Union opened its three hundredth thousandth money transfer agent location as the company continues to expand its send and receive locations globally. Revenues of $1.1 billion rose 8% while earnings per share were 25¢. Total consumer-to-consumer transactions rose 14% to 37.8 million. International transaction growth of 21% was offset by continued weakness within the U.S. and Mexico, which declined 6% and rose 2% respectively. Business-to-business transactions surged 64% to 100.4 million as the company added the transactions from the December acquisition of Servicio Electronico De Pago S.A., the largest collector and processor of public services cash payments in Argentina. Western Union has owned a 25% interest in the company which provides bill payment and pre-paid cell phone services through a network of 3,300 payment locations since its founding in 1993. Western Union shares are down 1% year to date.


Exxon-Mobil reported first quarter revenues and net profits 10% higher than a year ago. During the quarter Exxon applied 55% of its operating cash flow to its stock repurchase program, which has reduced fully diluted shares outstanding by 15% since the end of 2003. Cumulative purchases over the past year cut the weighted average number of shares outstanding by 7%, helping to lift first quarter earnings per share to $1.62, 18% above a $1.37 earned in last year’s quarter. Although Exxon’s US and Canadian oil and gas production volume declined almost 9% in the quarter, its worldwide production decreased only 3% which resulted in a 5% decline in profits from total oil and gas products on slightly lower prices. The source of Exxon’s improved profits were rising margins at its new non-US refining and chemical operations. The 60% year-to-year profit increase delivered by these operations is a tribute to the success of Exxon’s molecular management program which optimizes the product mix obtained from different feed stocks. Exxon’s record of successfully building and operating the world’s most efficient integrated refining and petrochemical installations helped it conclude in March an agreement for its 25% participation with Aramco and Sinopec in the world’s largest refinery-petrochemical complex situated in Fujian Province. The refinery will be built to process 240,000 barrels of sour crude daily from Saudi Arabia. It is scheduled to become operational at the beginning of 2009. Since the beginning of the year Exxon’s stock price is up 9%, almost half-again the concurrent rise in the price of oil.

Client portfolio holdings may change, and stocks of companies noted may or may not be held by one or more client portfolios from time to time. Investors should not consider references to individual securities as an endorsement or recommendation to purchase or sell such securities. Transactions in such securities may be made which seemingly contradict the references to them for a variety of reasons, including but not limited to, liquidity to meet redemptions or overall client portfolio rebalancing. Investing in the stock market involves gains and losses and may not be suitable for all investors. Investment return and principal value of an investment will fluctuate.