Stocks vs. Bonds

New Normal / Repression?

The Great Yield Decline In September of 1981, the 10 year yield was at 15.84%

As of 4-9-12, the 10 year yield was at 2.05%

This is a decline of 87%

Where’s the Yield? Fed planning on keeping rates low until late 2014 Implementation of ‘Operation Twist’ to help lower the long end of the curve And a yield curve that looks like this…. (highlighted by 10 and 30 year offerings)

Yield Decisions Symbol Description Yield

HYG iShares Iboxx H/Y Corp Bond

7.36%

WELA AGG YIELD

WELA STRATEGIES 6.20%

PFF iShares S&P Preferred Stock Index

6.03%

LQD iShares Iboxx Investment Grade Corp

4.23%

SDY S&P Dividend Aristocrat

3.17%

BND Vanguard Total Bond 3.03% *All yields based on T12M from Bloomberg **Yields as of 4-9-12

Dividends = Major Contributor

Yield from Appreciation? •2008 and recent market volatility has disproven this methodology…

Selling during down markets exacerbates already steep drops and current volatility has shown up more often than before…

Develop Income Certainty

Wela Strategies can do this through the DID approach:

The ‘DID’ Approach

Dividends from Stocks

Interest from Bonds

Distributions from Alternative Income Sources

Closed End Funds

Preferred Stock and Convertible

Bonds MLPs and

Royalty Trusts REITs

Wela Agg Yield Portfolio

Agg Yield Portfolio31% Bonds

Total BondInv. Grade BondHigh Yield Bond

33% CEFsCEF 1CEF 2CEF 3CEF 4CEF 5

33% Alternative IncomeReal EstateREITSInternational REITMLPsPreferred StockPreferred Stock Index

3% Cash

Interest- from bonds

Distributions-from CEF, REITs, MLPs and Preferred Stock

• The Income Bucket focuses on generating a consistent income stream

Yield without Correlation Asset Class

Agg Bond

Inv. Grade

High Yield

CEF MLP Preferred Stock

REIT

Agg Bond 1 .422 -.669 -.666 -.458 -.575 -.625

Inv. Grade

1 -.139 -.136 -.107 -.148 -.157

High Yield 1 .749 .613 .659 .671

CEF 1 .768 .83 .781

MLP 1 .703 .613

Pref. Stock

1 .648

REIT 1

*Data obtained from Bloomberg **Correlation for time period 10/11/2009-10/11/2011

Investment Decisions • 9 Member Investment Committee

• Same Investment Committee for $900M AUM firm makes strategic decisions that get funneled into the Wela models

• Driven by Institutional Research

• Ned Davis Research, Strategas Research Partners, Value Line Investment Survey, Morningstar Traded Fund Centre, and Bloomberg drive decisions

• Quantitative with Qualitative Overlay

• Investment Committee uses specific market data points, graphs, economic readings and commentary to guide decision making process, but ultimately decisions are up to people, not computers. Decisions regarding large vs. small, targeted bond duration, international vs. domestic, spreads vs. treasuries, are some of the examples.

• Semi-Annual Reallocations

• Allocations performed in August and February at a minimum. Additional changes can be made if warranted by market movements or news.

ETF Decisions • Index Strategy

• SDY vs. DVY: Prefer dividend growers vs. highest yielders

• GXC vs. FXI: Prefer top 25 vs. top 100 companies

• Index Matching

• IJH vs. DWM: We use S&P sectors, therefore, clear lines separate allocations

• Cost

• VWO vs. EEM: Prior to cap gains issues, we prefer cost w/out exposure loss

• Liquidity / size

• PFF vs. others: We prefer size and availability of market order trades

• Performance and other factors:

• Preferred stock analysis

Example: SDY vs. DVY Monthly Data 1/31/1972 - 3/31/2012 (Log Scale)

S09

Source: All data from Ned Davis Research, Inc.30

48

79

129

210

342

557

909

1481

2415

3936

30

48

79

129

210

342

557

909

1481

2415

3936

1975 1980 1985 1990 1995 2000 2005 2010

Dividend Growers & Initiators ( ) Gain Per Annum = 9.6% ($100 Grows To $4031) All Dividend-Paying Stocks ( ) Gain Per Annum = 8.8% ($100 Grows To $3000) Dividend Payers w/No Change in Dividends ( ) Gain Per Annum = 7.2% ($100 Grows To $1645) Dividend Cutters or Eliminators ( ) Gain Per Annum = -0.5% ($100 Grows To $83)Non Dividend-Paying Stocks ( ) Gain Per Annum = 1.7% ($100 Grows To $197)

S&P 500 Geometric Equal-Weighted Total Return Index ( ) Gain Per Annum = 7.1% ($100 Grows To $1585)

Returns based on monthly equal-weighted geometric average of total returns of S&P 500 component stocks, with components reconstituted monthly.

Returns of S&P 500 Stocks by Dividend Policy

Copyright 2012 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. . www.ndr.com/vendorinfo/ . For data vendor disclaimers refer to www.ndr.com/copyright.htmlSee NDR Disclaimer at

Contact Wela

• Director of Business Development

•Paul Scudellari, CFP®

•Paul@welastrategies.com

• Managing Partner

•Mitchell Reiner, CFP®, CIMA®

•Mitch@welastrategies.com

Local Address:

200 Sandy Springs Place

Suite 400

Atlanta, GA 30328

Website:

www.welastrategies.com

Phone:

404-531-0018

Compliance • This presentation from Wela Strategies, LLC is provided for informational purposes only and is not intended as an

offer or solicitation with respect to the purchase or sale of any security. • Past performance is not indicative of future results when considering any investment vehicle or investment index;

and historical references should not be viewed as predictive indicators. • This information is being presented without consideration of the investment objectives, risk tolerance or financial

circumstances of any specific investor. The securities discussed in this presentation may not be suitable for all investors. Each audience member should consult their own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

• This presentation is not a research report and is intended for informational purposes only. This presentation should not be viewed as investment advice or recommendations with respect to asset allocation or any particular investment. This information is not intended to illustrate any specific products, including: mutual funds, ETFs, stocks, bonds, MLPs, REITs, Royalty Trust, etc.

• This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Investing in the markets entails the risk of market volatility. The value of all types of investments may increase or decrease over varying time periods. To the extent investments mentioned herein represent securities, you should be aware that there may be additional risks associated with international investing, including foreign economic, political, monetary and/or legal factors, changing currency exchange rate, foreign taxes and differences in financial and accounting standards. These risks may be magnified in emerging markets.

• We believe the information obtained from third-party sources to be reliable, but neither Wela Strategies, LLC nor its affiliates guarantee its accuracy, timeliness, or completeness. The views, opinions and estimates herein are as of the date of the material and are subject to change without notice at any time in reaction to shifting market conditions. Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

• Examples provided are for illustrative purposes only and not intended to be reflective of results you should expect to attain.