Security Selection:

LCM’s fundamental research process incorporates the following inputs:

     •  “DCA” Analysis (Dominant & Competitive Analysis) – LCM’s research process places an emphasis on
        identifying companies with strong franchises that are dominant in their sector or industry, since dominant
        companies tend to be less affected by changes in an industry than other players in the market. The
        following factors are evaluated to determine a company’s dominance and relative competitive position:
        market-share analysis, differentiation of product/services, industry trends & competitor analysis,
        sustainability, and financial strength.

     •  Growth Factors – On the security level, LCM defines growth companies as those within each identified
        growth sectors with EPS growth rates in excess of those for the peer group. LCM will not purchase just any
        company that meets the firm’s definition of growth, as the stock must also be trading at a reasonable price.
        In order to determine the correct price for a stock relative to its growth rate, portfolio managers will calculate
        a PEG ratio for each company, which is based on the firm’s internal growth projections for it. Candidates
        for investment should have a PEG ratio below that of the S&P 500.

     • Quality Analysis – When analyzing a company, LCM will assess the overall financial strength of the
       company and will review factors such as a company’s assets/liabilities, capital structure, financial leverage
       (debt/equity), operating leverage, free cash flow yield and growth, return on equity, and its debt rating if
       applicable. LCM will also evaluate each company’s management and assess such factors as its strategic
       vision, stability, reputation, experience, and track record.

     • Valuation – LCM’s primary valuation metric is the PEG ratio, which incorporates forward earnings per
       share and long-term earnings growth estimates. In addition to PEG, from time to time LCM will also use
       price-to-cash flow (or cash flow yield) as a secondary valuation metric. The firm does not use explicit price
       targets, but instead reviews each position’s relative performance to the benchmark.

Sell Discipline:

LCM employs strict sell disciplines to protect its clients’ portfolios. Positions will be sold if a stock:
 
     • Becomes overpriced – LCM does not use explicit price targets in the valuation of companies, but rather
       relies upon relative valuation metrics, such as PEG. LCM views a sector and company’s value on a relative
       basis (in accordance with macroeconomic assumptions), and will sell a position if the company’s PEG
       ratio is no longer less than the broad market.
     
     • Can be replaced with better risk/reward opportunity – If an Investment Committee member believes
       that a current holding can be replaced by another security with either better upside potential, a more
       favorable PEG or a less risky profile, the company will be brought to the attention of the Investment
       Committee. A discussion will occur as to which position is better suited to the current strategy the firm is
       pursuing; subsequently a decision will be made.

     • Changes occur that affect a stock’s fundamentals – The firm’s fundamental research does not stop
       once a security is included in the portfolio. This process is also used to ensure that no adverse factors are
       changing the original fundamental case made for the inclusion of the stock in the portfolio. If one or more
       factors do change and the stock is no longer fundamentally sound or is no longer likely to meet our
       expectations, the position will be sold.
      
     • Position weight reaches 8% – LCM’s investment process will not permit a position in single security to
       exceed 8% of the portfolio. Once a position approaches this level, it will be scaled back. On average,
       large-cap positions do not exceed 5%; if LCM were to hold medium-to-smaller cap positions, they would
       not exceed 3%.

     • Price depreciation – Portfolio managers regularly review stocks whose performance lags on both an
       absolute and relative basis. Any discrepancies in performance relative to a company’s sector and/or
       market—i.e., 20% underperformance on a 6-month trailing basis—are immediately reviewed by our
       Investment Committee. If this depreciation is fundamental in nature, the company’s PEG ratio will be
       adjusted accordingly. If the resulting PEG is no longer attractive relative to the sector, then such
       circumstances will warrant this position being sold. If the company’s fundamentals remain sound and its
       earnings and growth prospects remain intact, the investment committee can decide to retain the position.