RAYMOND JAMES

Overview of the

IDEAS Portfolio

Management Strategy

IDEAS

Portfolio Management

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC

1815 Lockeway Dr., Suite 104 | Alpharetta, GA 30004 Office: (678) 762-0760 | Fax: (678) 762-0761

www. raymondjames.com/ideas

Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. IDEAS Portfolio Management is not a registered broker/dealer and is independent of Raymond James Financial Services.

The Importance of Saving

RAYMOND JAMES

Most of us do not have any trouble spending our money; accumulating it is the hard part. As financial

advisors, helping our clients save for secure financial futures is our main goal. With college tuition costs spiraling

out of sight and the realization that Social Security will only cover 15% to 25% of the average person’s retirement

needs, a well-designed savings and investment plan is a must.

But what is the best way to save? Although CDs and U.S. Treasury Bonds provide high degrees of principle

protection, they rarely offer growth beyond that of inflation and taxes. Common stocks can provide the long-term

growth desired but do so with the threat of short-term market volatility. Before further discussion of which asset

class should be utilized in your plan, perhaps a review of the basics is in order.

Seated: Thomas DeLaHunt and Jeanne DeLaHunt

Standing: Dustin DeLaHunt

The Most Important Thing to Know

About Investing Is …

RAYMOND JAMES

Now, there’s a bold statement! Most investors are happy to see their money grow. With that in mind, let’s

discuss the “Rule of 72”. It’s a simple way to determine how long it will take your money to double at various

rates of return.

It is just this easy: If you make a 12% annual return on your investment, it will take six years for your money to

double, because 12 x 6 = 72. By contrast, if you realize a 4% annual return on your money, then it will take 18

years for your money to double, because 4 x 18 = 72. Let’s look at an example to illustrate why this simple

concept is so important.

Let’s say you’re a 47-year-old with $100,000 that you would like to grow for your retirement. This is where you

would stand at your retirement age of 65:

Age Amount at 12% Age Amount at 4%

47 $100,000 47 $100,000

53 $200,000

59 $400,000

65 $800,000 65 $200,000

As you can see, during the 18-year period, the investor who realized a 12% rate of return had their money double

two more times than the investor with a 4% rate of return.

So, today you will make a very important decision – a decision that will affect not so much the present-day you,

but the person you will become someday in the future. Think of it this way … at retirement age, you are going to

look at yourself in the mirror and do one of two things, either say “good job”, or kick yourself for not doing so

well.

The Rule of 72 uses simple mathematics to help us understand the importance of our investments’ rate of return.

However, as important as this knowledge is, it is, in fact, just mathematics. It doesn’t show us which investment

to utilize to achieve the desired rate of return, and it certainly doesn’t encourage us to take undue risk to try and

get higher returns.

This hypothetical example is for illustrative purposes only and is not intended to imply or represent a specific return on any particular investment. It also does not reflect fees, charges or taxes associated with any particular investment, which would reduce the total return. Past performance is not indicative of future results.

Risk Is a Most Interesting Concept

RAYMOND JAMES

As an investor, you should constantly evaluate and re-evaluate your appetite for risk. You shouldn’t throw caution

to the wind and take undue risk, because if you do, it won’t be long before you discover the “boogie man” lurking

in the shadows, just waiting for the opportunity to take your hard-earned money.

Investing is not baseball. In baseball, the prettiest thing to see is the “homerun hitter”. He swings for the fences

and when he connects, the ball flies out of the park and everyone stands and cheers. However, in baseball, the

guys who swing for the fences also strike out the most. Now, that’s okay in baseball because they get to come

back to the plate in two or three innings to redeem themselves. But when you strike out in money, no one will

give you your money back two or three innings later.

When it comes to investing, investors and advisors alike should take the time to read the fine print to enable them

to better understand the various kinds of camouflage risk can hide behind. They should focus on quality and

predictability, as they remember the simple fact that the key to growing money is to have as few negative return

years as possible.

Risk

RAYMOND JAMES

Naturally, most of us would like to enjoy the benefits of investing without facing any of the pitfalls. It would be

nice to own stocks and bonds while the market is going up and be out of the market when they are declining.

However, because this kind of perfect timing is difficult at best, most investors follow the conventional wisdom

“that as long as the long-term trend of the market is up, then an occasional decline is meaningless.” The numbers

in the following chart show that this is not necessarily true.

The chart above makes two points: Even if your account were to be up 15% for three straight years, just one 15%

decline takes your four-year average annual compound rate of return down to 6.6%. So to get back to a 15%

average annual compound rate of return, you would need to gain 56% in year five.

Historically, the growth-oriented investor has received the best returns from common stocks. However, it is

important to note that although smaller companies have historically provided slightly better returns, they also tend

to pose a much greater degree of volatility than larger companies.

Risk

RAYMOND JAMES

Reduction of Risk Over Time 1926 - 2015

Many sophisticated investors choose strategies that fit their philosophies and stick with them. We have a unique

investment strategy designed for the growth-oriented investor who wishes to own high-quality companies for

long-term capital appreciation. Within the entire universe of stocks, we have identified 15 quality companies that

have historically increased their earnings and dividends year after year. *

*Past performance is not indicative of future results. Dividends will fluctuate and are not guaranteed

IDEAS Portfolio Management

RAYMOND JAMES

IDEAS, which stands for the “Increasing Dividends and Earnings Annually Strategy”, was created and is managed

by Tom DeLaHunt. There are two types of IDEAS portfolios: The Core Strategy, which is a growth strategy, and

Covered Call Writing, a growth and income strategy.

IDEAS – The Core Strategy*

This strategy was designed for the growth-oriented investor and is intended for long-term capital appreciation.

In this strategy, investors buy and hold equal dollar amounts of 15 high quality companies. Within the entire

universe of stocks, Tom has identified the companies that have historically increased their earnings and dividends

(if applicable) year after year. By choosing 15 of these stocks, he creates a diversified portfolio generally made

up of large capitalization companies. We reserve the right to add some mid-cap companies if appropriate. When

creating the IDEAS Portfolio, he looks for companies that are leaders in their respective industries, have strong

financial statements, strong management, a diverse global customer base, and create large amounts of free cash

flow.

Rebalancing of the IDEAS portfolio is generally done near the end of each year but is not required. We will

consider selling if a company fails to increase its earnings (based on a 12-month rolling average) this year

compared to last year. If earnings do not increase year over year, we are not required to sell the stock but generally

will when we feel it is timely.

Tom will also consider selling for any reason he feels is necessary to protect the client’s portfolio. An example

of this would be if one of the IDEAS companies were involved in a lawsuit that appeared, in our opinion, to be

negative. We can also take all or part of the portfolio to cash at any time. These situations do not happen often

and are usually for short periods of time. If a sizable portion of the portfolio will be in cash for more than 90 days,

the funds could be invested in Treasury Bills or other short-term cash management products.

*There is no assurance any investment strategy will be successful. Investing involves risk and investors may incur a profit or a loss. Diversification does not ensure a profit or protect against a loss. Investing in small-and mid-cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. U.S. Treasury Bills are guaranteed by the U.S. government and if held to maturity, offer a fixed rate of return and guaranteed principle value. Treasury Bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

IDEAS Portfolio Management

RAYMOND JAMES

IDEAS – Covered Call Writing Strategy*

Utilizing the same 15 IDEAS companies, plus several others that are on the IDEAS watch list, Tom has created

a covered call option writing strategy. This strategy is designed for the investor who is interested in both growth

and income. Covered call writing is generally more transactional in nature and is recommended that it be done

within a tax-deferred account. However, this strategy can be done in a taxable account as well.

Depending on the size of the account, we will allocate the account into 12 to 18 companies consisting of 6% to

8% positions. Each position will be rounded to 100 share lots. “Out of the money” call options will be written to

create the income component of the strategy. Dividends, when applicable, also add to the income component. *

A call writer receives cash for selling the call but will be obligated to sell the stock at the call’s strike price if

assigned. A covered call writer also gives up any appreciation above the strike price and the sale of shares due to

assignment may result in a taxable gain for the option writer.

The options are generally sold for a period of one to three months in duration. We can buy back the option, let it

get called or let it expire as worthless. Then, the process would be repeated.

Generating income from covered calls does not provide protection from significant downward price movement.

Downside protection is limited to the amount of premium received from the sale of the covered call.

We can also take all or part of the portfolio to cash at any time. These situations do not happen often and are

usually for short periods of time. If a sizable portion of the portfolio will be in cash for more than 90 days, the

funds could be invested in Treasury Bills or other short-term cash management products.

Options trading involves risk and is not suitable for all investors. Prior to making any options transactions,

investors must receive a copy of an Options Disclosure Document which can be obtained from our office.

*There is no assurance any investment strategy will be successful. Investing involves risk and investors may incur a profit or a loss. Diversification does not ensure a profit or protect against a loss. Investing in small-and mid-cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. U.S. Treasury Bills are guaranteed by the U.S. government and if held to maturity, offer a fixed rate of return and guaranteed principle value. Treasury Bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Listed Call Option Worksheet Page 1

RAYMOND JAMES

Who Should Consider Using Covered Calls?

• An investor who is neutral to moderately bullish on some of the equities in his portfolio.

• An investor who is willing to limit upside potential in exchange for some downside

protection.

• An investor who would like to be paid for assuming the obligation of selling a particular

stock at a specified price.

This strategy would work equally well for a cash,

margin, Keogh account or IRA. Although this

strategy may not be suitable for everyone, any of

the investors above may benefit from using the

covered call.

Definition

Covered call writing is either the simultaneous

purchase of stock and the sale of a call option or the

sale of a call option against a stock currently held by

an investor. Generally, one call option is sold for

every 100 shares of stock. The writer receives cash

for selling the call but will be obligated to sell the

stock at the strike price of the call if the call is

assigned to the account. In other words, an investor

is "paid" to agree to sell the holdings at a certain

level (the strike price). In exchange for being paid,

the investor gives up any increase in the stock above

the strike price.

How to Use Covered Calls If an investor is neutral to moderately bullish on a

stock currently owned, the covered call might be a

strategy to consider. Let’s say that 100 shares are

currently held in the account. If the investor was to

sell one slightly out-of-the-money call, the investor

would be paid a premium to be obligated to sell the

stock at a predetermined price, the strike price. In

addition to receiving the premium, the investor

would also continue to receive the dividends (if any)

as long as the stock is still owned.

The covered call can also be used if the investor is

considering buying a stock on which he is

moderately bullish for the near term. A call could

be sold at the same time the stock is purchased. The

premium collected reduces the effective cost of the

stock and the investor will continue to collect

dividends (if any) for as long as the stock is held.

Listed Call Option Worksheet Page 2

RAYMOND JAMES

In either case the investor is at risk of losing the stock if it rises above the strike price. Remember, in exchange

for receiving the premium for having sold the calls, the investor is obligated to sell the stock. However, as you

will see in the following example, even though the investor has given up some upside potential there can still be

a good return on the investment.

Stock ZYX currently is priced at $41.75, and the investor thinks this might be a good purchase. The three-

month 45 calls can be sold for $1.25. Historically, ZYX has paid a quarterly dividend of $0.25. By selling

the three-month 45 call the investor is agreeing to sell ZYX at $45 should the owner of the call decide to

exercise the right to buy the stock. Keep in mind that the call owner may exercise the option if the stock is

above $45, because he will be able to buy the stock for less than it is currently trading for in the open market.

But, as you will see, the investor's return will be greater than if he had held the stock until it reached $45 and

then sold it at that price.

Let’s take a look at what happens to a covered call position as the underlying stock moves up or down.

Commissions have not been taken into consideration in these examples; however, they can have a significant

effect on your returns.

Buying 100 ZYX at $41.75 and Selling 1 Three-Month 45 Call at $1.25 I. ZYX remains below $45 between now and expiration--call not assigned.

The call option will expire worthless. The premium of $1.25 and the stock position will be retained. In effect

you have paid $40.50 (which is also the breakeven price) for ZYX ($41.75 purchase cost - $1.25 premium

received for sale of call). This would be offset by any dividends that were received, which in this example

would be $0.25.

When the ZYX call expires worthless, the covered call writer can sell another call going further out in time

taking in additional premium. Once again, this produces an even lower purchase cost or breakeven.

If ZYX remains below $45 for an entire year, the investor can sell these calls four times. For this example we

will make the hypothetical assumption that the price of the stock and option premiums remain constant

throughout the year.

$1.25 (Call Premium Received) x 4 = $5 in Premium + Any Dividends Paid = Total Income.

Listed Call Option Worksheet Page 3

RAYMOND JAMES

II. ZYX rises above 45 between now and expiration--call assigned.

The call buyer can exercise the right to buy the stock and the call seller will have to sell ZYX at $45, even

though ZYX has risen above $45. But remember the call seller has taken in the premium of the call and has

been earning dividends (if any) on the stock.

If ZYX stock is called away at expiration:

Receive: $45 for Stock $4,500

Less: Net Investment (Stock Cost - Premium Received)

[$4,175 - $125] ($4,050)

Return: 11.11% $450* *In three months plus dividends (if any) received.

III. ZYX is right at $45 at expiration.

The seller of a call may be in situation I or II. The stock may be called away and the call writer will be

obligated to sell ZYX at $45. Alternatively, the stock may not be called away. A call could then be sold going

further out in time, bringing in additional premium and further reducing the breakeven point.

Summary The covered call write is a strategy that has the ability to meet the needs of a wide range of investors. It can be

used in your Keogh, margin, cash account or IRA against stock you already own or are planning on buying.

Currently, there are short-term options listed on more than 2,000 stocks and more than 400 of those stocks

also have LEAPS®, Long-term Equity AnticiPation SecuritiesTM, which are simply long-term stock and index

options. Today’s investor has a choice of short-term and long-term expirations, as well as multiple strike

prices. This strategy is actually more conservative than just buying stock, due to the fact that you have taken in

premium and lowered your breakeven price on the stock position. The covered write allows you to be paid for

assuming the obligation of selling a particular stock at a specified price.

Listed Call Option Worksheet Page 4

RAYMOND JAMES

Covered Call Worksheet

Initial Funds Required Cash Account

1. Purchase Shares @

2. Plus Stock Commission +

3. Total Stock Cost =

4. Option Premium

(# of Calls x Price x 100)

5. Less Option Commission -

6. Net Option Premium =

(Line 4 - Line 5)

7. Total Investment =

(Line 3 - Line 6)

Call Assigned, Stock Called Away (Stock At Or Above Strike)

8. Sell Shares @ Strike

9. Less Commission On Stock Sale (Assignment)

-

10. Plus Net Option Premium (Line 6)

11. Less Total Stock Cost (Line 3)

12. Profit On Net Stock Position

13. Plus Projected Dividend(s) on

Shares

14. Net Profit

15. Percentage Return For Period

(Line 14 divided by Line 7)

16. Annualized Return

(Line 15 x 365 divided by # of Days)

+

-

=

+

=

=

=

Date

Stock Stock Price

Strike Price Option Price

Expiration Month Days to Expiration

Annual Dividend Dividend Date(s)

Listed Call Option Worksheet Page 5

RAYMOND JAMES

Call Not Assigned, Stock Not Called Away

(Stock At Or Below Strike)

Cash Account

17. Total Investment (Line 7)

18. Less Projected Dividend(s) on -

Shares (Line 13)

19. Net Cost at Expiration =

20. Breakeven Price at Expiration =

(Line 19 divided by # of Shares)

*Please Note: The profit or loss and annualized rate of return calculated will be achieved only if the parameters

described can be duplicated and there is no certainty of this occurring.

FREE interactive strategies are available at www.cboe.com

Commission, dividends, margins, taxes and other transaction charges have not been included. However, they will affect the outcome of option

transactions and should be considered. The strategy discussed above is for illustrative and educational purposes only and should not be

construed as an endorsement, recommendation or solicitation to buy or sell any particular security. Options involve risk and are not suitable

for all investors. For information on the uses and risks of options, you can obtain a copy of Characteristics and Risks of Standardized Options from

The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, IL 60606, 1-888-OPTIONS.

LEAPS® is a registered trademark and Long-term Equity AnticiPation SecuritiesTM is a trademark of the Chicago Board Options Exchange, Inc.

1/03

Disclosures

RAYMOND JAMES

Aggressive growth stocks appeal to investors seeking a potentially higher rate of return. Beta compares the volatility of a security to a benchmark index, such as the S&P 500. A beta of one indicates that the security has volatility equal to that of the index. A beta greater than one indicates that the security is more volatile than the index, and a beta of less than one indicates that the security is less volatile than the index. Classic growth stocks are generally mature firms that have relatively predictable, visible earnings. Cyclical stocks are sensitive to business cycles and their performance is strongly tied to the overall economy. The stock’s price will generally rise when the economy turns up and will generally fall when the economy turns down. Dividend yield, also known as current yield, is a measure of the income generated by a security divided by the price of that security as of a given date. Dividend growth rate is the annualized percentage rate of growth that a particular stock’s dividend undergoes over a period of time. Earnings per share (EPS) is the net income divided by the number of common shares outstanding. Earnings per share growth rate (EPSGR) is the incremental rate of EPS over certain periods of time. Forward P/E is the price to earnings ratio of the next four quarters – the current price divided by the estimated future earnings. Free cash flow is a measure of financial performance calculated as operating cash flow minus capital expenditures. It represents the cash that a company is able to generate after deducting the funds required to maintain or expand its asset base. Return on assets is a measure of a company’s profitability expressed as a percentage of its total assets. It is calculated by dividing a company’s net income by its total assets. It measures how effectively a company has generated profits with its available assets. Return on equity is the ratio of net income to common equity. It measures the rate of return on common stockholders’ investments. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Investors cannot invest directly in an index. (i) The member makes a market in the securities being recommended, or in the underlying security if the recommended security is an option,

and/or that the member or associated persons will sell to or buy from customers on a principal basis; (ii) The member and/or its officers or partners own options, rights or warrants to purchase any of the securities of the issuer whose securities

are recommended, unless the extent of such ownership is nominal; and (iii) The member was manager or co-manager of a public offering of any securities of the recommended issuer within the last 12 months. Supporting documentation for any claims, comparison, recommendations, statistics, or other technical data will be supplied upon request. The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete.