Investment Proposal Final

INVESTMENT PROPOSAL FOR

FRED AND ETHEL MERTZ

Allocated by: Joshua McLenachen

Client Information

Clients: Fred Mertz: Retired, age 75 Ethel Mertz: Retired, age 76

Household Income: Fred’s Pension: $2,200/month Fred’s Social Security: $1,500/month Ethel’s Social Security: $750/month

Tax Bracket: 15%

Net Worth: $825,000

Risk Comfort Level: Conservative to moderate investors who want assets to grow for their four daughters and

accumulate additional income for cruises.


2

Recommended Asset Allocation: Personal Account ($150,000)

Recommended Investments

Bonds: Apple Incorporated: 14% ($21,000) JP Morgan Chase Bank N.A.: 8% ($12,000) Costco Wholesale Corporation: 8% ($12,000)

Cash: Money Market: 25% ($37,500)

Stocks: Apple Incorporated: 2% ($3,000) Google Incorporated: 2% ($3,000) Home Depot Incorporated: 2% ($3,000) McDonald’s Corporation: 2% ($3,000) PepsiCo Incorporated: 2% ($3,000)

Mutual Funds: Boston Partners All Cap Value Fund (Large Cap Value): 5% ($7,500) T. Rowe Price Value Fund (Large Cap Value): 5% ($7,500) PrimeCap Odyssey Growth Fund (Large Cap Growth): 10% ($15,000) T. Rowe Price Institutional Mid Cap Equity Growth Fund (Mid Cap Growth): 8%

($12,000) Fidelity® China Region Fund (Large Cap Blend): 7% ($10,500)


Bonds: 30%Cash: 25%Stocks: 10%Large Cap Value: 10%Large Cap Growth: 10%Mid Cap Growth: 8%International: 7%

3

Recommended Asset Allocation: Fred’s IRA ($300,000)







Recommended Asset Allocation: Ethel’s IRA ($75,000)



4







Expected Returns



5

Asset Allocated Percent Allocated Estimated Return Total Return

Large Cap Value 10% 10-12% 1-1.2%Large Cap Growth 10% 10-12% 1-1.2%

Mid Cap Growth 8% 10-12% 0.8-0.96%

Int. Large Cap Blend 7% 10-12% 0.7-0.84%

Stocks 25% 11% 2.75%

Bonds 10% 6% 0.6%

Cash 30% 2% 0.6%

7.45-8.15%


6

Mutual Fund Information

Boston Partners All Cap Value Fund: Investment Category : Large Cap Value Fund

Investment Objective : The Robeco Boston Partners All-Cap Value Fund seeks to provide long-term growth of capital primarily through investment in equity securities. Current income is a secondary objective.

Fund Inception Date : July 1, 2002 Amount Managed by Fund : $1.03 billion Top 10 Holdings :

1. JPMorgan Chase & Co.2. EMC Corp.3. Citigroup Inc.4. Capital One Financial Corp.5. Amgen Inc.6. Johnson & Johnson7. Oracle Corp.8. Exxon Mobile Corp.9. Bny Mello Cash Reserve Eod Fund10. Cisco Systems Inc.

Manager Bio : Mr. Ramallo is the portfolio manager for Robeco Boston Partners Premium Equity product. Previously, Mr. Ramallo was the assistant portfolio manager for the Small Cap Value products. Prior to his portfolio management role, Mr. Ramallo was a research analyst for Boston Partners. He joined the firm from Deloitte & Touche L.L.P., where he spent three years, most recently in their Los Angeles office. Mr. Ramallo holds a B.A. degree in economics/business from the University of California at Los Angeles and an M.B.A. from the Anderson Graduate School of Management at UCLA. He holds the Chartered Financial Analyst designation. He is also a Certified Public Accountant (inactive). He has nineteen years of investment experience.

Morningstar Rating : SEC Total Return Percentage Results for A Shares for 1, 5, and 10 Years :

1 Year: 13.48% 5 Year: 13.83% 10 Year: 10.02%


7

T. Rowe Price Value Fund: Investment Category : Large Cap Value Fund

Investment Objective : The investment seeks long-term capital appreciation; income is a secondary consideration. In taking a value approach to investment selection, at least 65% of total assets will normally be invested in common stocks the portfolio manager regards as undervalued. The fund may purchase stocks issued by companies of any size, but typically focuses its investments on large-cap stocks. While most assets will typically be invested in U.S. common stocks, the fund may invest in foreign stocks in keeping with its objectives.

Fund Inception Date : September 30,1994 Amount Managed by Fund : $22.92 billion Top 10 Holdings :

1. General Electric Co.2. American Airlines Groups Inc.3. Pfizer Inc.4. JPMorgan Chase & Co.5. Citigroup Inc.6. Merck & Co.7. MetLife Inc.8. Bank of America Corp.9. Boeing Co.10. Thermo Fisher Scientific Inc.

Manager Bio : Mark Finn is the lead portfolio manager of the US Value Equity Strategy and is also a co-chairman of the U.S. Large-Cap Value Equity Strategy. Mr. Finn is a vice president of T. Rowe Price Group, Inc. Mr. Finn has 14 years of investment experience, all of which have been with T. Rowe Price. From 2005 to 2009, Mr. Finn was an equity research analyst specializing in electric power generation, utilities, and coal. Prior to this, he was an analyst in T. Rowe Price's Fixed Income Division, where he also covered utilities and power generation. From 1998 to 2001, Mr. Finn worked with the T. Rowe Price Recovery Strategy team, where he evaluated financially distressed companies. Mr. Finn began his career with T. Rowe Price in 1990 in the Finance Division, where he served as controller of T. Rowe Price Investment Services, Inc., and as the principal accounting officer for the T. Rowe Price Realty Income Strategies. Prior to joining the firm, he had five years of auditing experience with Price Waterhouse LLP, where he worked on engagements for both public and private companies. Mr. Finn earned a B.S. from the University Of Delaware and has obtained the Chartered Financial Analyst designation and is a certified public accountant.

Morningstar Rating :


8

SEC Total Return Percentage Results for A Shares for 1, 5, and 10 Years :1 Year: 10.83% 5 Year: 14.36% 10 Year: 8.92%

PrimeCap Odyssey Growth Fund: Investment Category : Large Cap Growth Fund

Investment Objective : The investment seeks to provide long-term capital appreciation. The fund invests primarily in the common stocks of U.S. companies, emphasizing those companies with the potential for above average earnings growth. It may invest in stocks across all market sectors and market capitalizations. Although it has historically invested primarily in large- and mid-capitalization companies, it has also invested a significant portion of its assets in small-cap stocks.

Fund Inception Date : November 1, 2004 Amount Managed by Fund : $5.71 billion Top 10 Holdings :

1. Amgen Inc.2. Eli Lilly and Co.3. Roche Holding AG Dividend Right Cert.4. Seattle Genetics Inc.5. Biogen Idec Inc.6. L Brands Inc.7. Southwest Airlines Co.8. Charles Schwab Corp.9. Adobe Systems Inc.10. Microsoft Corp.

Manager Bio : Mr. Fried joined PRIMECAP Management Company in June 1986, he is the lead manager of Vanguard PRIMECAP Core fund. Upon graduation from the Anderson Graduate School of Management at UCLA, he spent one year as a financial analyst with Hughes Investment Management Company, a wholly owned subsidiary of Hughes Aircraft. Mr. Fried received his undergraduate degree in Economic System/Science from the University of California, Los Angeles.


1 Year: 16.21% 5 Year: 14.41% 10 Year: 10.82%


9

T. Rowe Price Institutional Mid Cap Equity Growth Fund: Investment Category : Mid Cap Growth Fund

Investment Objective : The investment seeks to provide long-term capital appreciation. The fund will normally invest at least 80% of its net assets (including any borrowings for investment purposes) in a diversified portfolio of common stocks of mid-cap companies whose earnings T. Rowe Price expects to grow at a faster rate than the average company. It defines mid-cap companies as those whose market capitalization (number of shares outstanding multiplied by share price) falls within the range of either the S&P Midcap 400 Index or the Russell Midcap Growth Index. The fund may invest in foreign stocks in keeping with the fund's objectives.

Fund Inception Date : July 31, 1996 Amount Managed by Fund : $5.11 billion Top 10 Holdings :

1. CarMax Inc.2. Fiserv Inc.3. Pall Corp.4. Textron Inc.5. CareFusion Corp.6. HIS Inc. Class A7. Altera Corp.8. DENTSPLY International Inc.9. Red Hat Inc.10. Intuitive Surgical Inc.

Manager Bio : Mr. Berghuis has been chairman of the committee. He started at T. Rowe Price in 1985 as an analyst following the retail sector, and he became a portfolio manager in 1992. Previously, Berghuis was a summer research associate at Dominion Securities Pitfield and spent two years at Kidder, Peabody & Co. as a deferred admission associate in utility corporate finance. Berghuis earned a BA, cum laude, from Princeton University's Woodrow Wilson School of Public and International Affairs. He also holds an MBA from Harvard Business School. Berghuis has earned the CFA designation.


1 Year: 19.46% 5 Year: 16.51% 10 Year: 12.60%


10

Fidelity® China Region Fund: Investment Category : Large Cap Blend Fund (China Region)

Investment Objective : The investment seeks long-term growth of capital. The fund normally invests at least 80% of assets in securities of Hong Kong, Taiwanese, and Chinese issuers and other investments that are tied economically to the China region. It normally invests primarily in common stocks. The fund allocates investments across different China region countries. It invests up to 35% of total assets in any industry that accounts for more than 20% of the Hong Kong, Taiwanese, and Chinese market. The fund uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market economic conditions to select investments.

Fund Inception Date : November 1, 1995 Amount Managed by Fund : $1.86 billion Top 10 Holdings :

1. Taiwan Semiconductor Mfg. Co. Ltd.2. Industrial and Commercial Bank of China Ltd H Shares3. A|A Group Ltd.4. Bank of China Ltd. H Shares5. China Construction Bank Corp. H Shares6. China Pacific Insurance Group H Shares7. Ping An Insurance Group H Shares8. China Life Insurance Co. Ltd.9. Hong Kong Exchanges and Clearing Ltd.10. Techtronic Industries Co. Ltd.

Manager Bio : Mr. Bao is a portfolio manager of Fidelity Investments. Since joining Fidelity Investments in 1997, Mr. Bao has worked as an equity research analyst and portfolio manager.


1 Year: 39.24% 5 Year: 13.10% 10 Year: 13.67%


11

Stock Information

Apple Incorporated (AAPL): Company Description : Apple Inc. designs, manufactures, and markets mobile

communication and media devices, personal computers, watches, and portable digital music players worldwide. The company also sells related software, services, accessories, networking solutions, and third-party digital content and applications. It offers iPhone, a line of smartphones that comprise a phone, music player, and Internet device; iPad, a line of multi-purpose tablets; Mac, a line of desktop and portable personal computers; iPod, a line of portable digital music and media players, such as iPod touch, iPod Nano, and iPod shuffle; and Apple Watches, personal electronic devices that combine watch technology with an iOS-based user interface. The company also provides iTunes app and the iTunes Store; Mac App Store that allows customers to discover, download, and install Mac applications; iCloud, a cloud service; Apple Pay for making mobile payments; Apple TV, a portfolio of consumer and professional software applications; iOS and OS X operating systems software; iLife, a consumer-oriented digital lifestyle software application suite; iWork, an integrated productivity suite designed to help users create, present, and publish documents, presentations, and spreadsheets; and other application software, including Final Cut Pro, Logic Pro X, and its FileMaker Pro database software. In addition, it offers various Apple-branded and third party Mac-compatible and iOS-compatible accessories, including headphones, cases, displays, storage devices, and various other connectivity and computing products and supplies. The company sells and delivers digital content and applications through the iTunes Store, App Store, iBooks Store, and Mac App Store; and sells its products through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. The company was founded in 1977 and is headquartered in Cupertino, California.

Earnings Per Share : 7.39 P/E Ratio : 16.93 Dividend : 1.88 PEG Ratio : 1.05 Estimated Earnings for Current year : 8.98 Strengths and Weaknesses/Risk Factors : Strengths would be Apple’s innovation as well

as their rock solid finances. Weaknesses could include how expensive their products are, or premium pricing, and the iPad, which seemingly fails every time a new one is released.

Why Buy : Apple Inc. is a company that has proven itself year after year as one of the top, if not the top, electronics company in the world. Their iPhone sets record sales every year, and their stock options have been steady and rising since the start of the company.


12

Google Incorporated (GOOG): Company Description : Google Inc., a technology company, builds products and provides

services to organize the information. The company offers Google Search, which provides information online; Google Now that offers information to users when they need it; AdWords, an auction-based advertising program; AdSense, which enables Websites that are part of the Google network to deliver ads; DoubleClick Ad Exchange, a marketplace for the trading display ad space; and other advertising platforms, such as AdExchange and AdMob. It also offers YouTube that offers video, interactive, and other ad formats; Android, an open source mobile software platform; hardware products, including Chromebook, Chrome OS devices, Chromecast, and Nexus devices; Google Play, a cloud-based digital entertainment store for apps, music, books, and movies; Google Drive, a place for users to create, share, collaborate, and keep their stuff; and Google Wallet, a virtual wallet for in-store contactless payments. In addition, the company provides Google Apps, which include Gmail, Docs, Slides, Drawings, Calendar, Sheets, Forms, Sites, etc. for people to work anywhere, anytime, on any device without loss of security or control; Google Maps Application Programming Interface; and Google Earth Enterprise, a software solution for imagery and data visualization. Further, it offers Google+ to share things online with people; Groups to create mailing lists and discussion groups; Blogger to share the life online with a blog; and Hangouts for group conversations. Additionally, Google provides App Engine, a platform as a service offering; Google Cloud Storage; Google BigQuery for real time analytics; Google Cloud SQL to store and manage data using a relational MySQL database; Google Compute Engine, an infrastructure as a service platform; and Google Developers to find all Google developer documentation, resources, events, and products. Google Inc. was founded in 1998 and is headquartered in Mountain View, California.

Earnings Per Share : 20.99 P/E Ratio : 16.56 Dividend : N/A PEG Ratio : 1.71 Estimated Earnings for Current year : N/A Strengths and Weaknesses/Risk Factors : Strengths will also be Google search that

everyone uses to search any questions they have about anything. Android is staying strong which Google has an 80% global market share. The only weakness that they have is that the company is not diversified enough. They are a one trick pony.

Why Buy : Google is the first of its kind and the only to greatly succeed with no competitors even close to them. Their company only seems to be looking up as the future approaches.


13

Home Depot (HD): Company Description : The Home Depot, Inc. operates as a home improvement retailer.

It operates The Home Depot stores that sell various building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me, and professional customers. The company offers installation programs that include flooring, cabinets, countertops, water heaters, and sheds; and professional installation in various categories sold through its in-home sales programs, such as roofing, siding, windows, kitchen and bath refacing, furnaces, and central air systems, as well as act as a contractor to provide installation services to its do-it-for-me customers through third-party installers. It primarily serves professional remodelers, general contractors, repairmen, small business owners, and tradesmen. The company also sells its products through online. As of the February 1, 2015, the company had 2,269 stores located throughout the United States, including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam, Canada, and Mexico. The Home Depot, Inc. was founded in 1978 and is based in Atlanta, Georgia.

Earnings Per Share : 4.71 P/E Ratio : 23.00 Dividend : 2.36 PEG Ratio : 1.43 Estimated Earnings for Current year : 5.23 Strengths and Weaknesses/Risk Factors : Strengths would include excellent execution as a

company, product innovation, professional clientele, and shareholder friendly. Their only weakness is their relatively small online presence.

Why Buy : Home Depot is shareholder friendly, as stated above, and is another company that has not much competition. Lowe’s continues to make runs at Home Depot, however, Home Depot is what the American public knows and loves.


14

McDonald’s (MCD): Company Description : McDonald's Corporation operates and franchises McDonald's

restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. The company's restaurants offer various food products, soft drinks, coffee, and other beverages. As of December 31, 2014, it operated 36,258 restaurants, including 29,544 franchised restaurants comprising 20,774 franchised to conventional franchisees, 5,228 licensed to developmental licensees, and 3,542 licensed to foreign affiliates; and 6,714 company-operated restaurants. The company was founded in 1940 and is based in Oak Brook, Illinois.

Earnings Per Share : 4.46 P/E Ratio : 21.64 Dividend : 3.40 PEG Ratio : 3.47 Estimated Earnings for Current year : 4.76 Strengths and Weaknesses/Risk Factors : Strengths would include recession resistant with

cheap food and customer loyalty, global franchise, and massive buying power. Weaknesses would be that they are so large it is hard to expand, and that their food is often viewed as unhealthy.

Why Buy : McDonald’s is a global corporation that has a large footprint on the world. They seemingly cannot be taken down by another chain fast food restaurant or even a recession. Their cheap food keeps customers coming back and profit margin’s going through the roof.


15

PepsiCo Incorporated (PEP): Company Description : PepsiCo, Inc. operates as a food and beverage company

worldwide. Its Frito-Lay North America segment offers Lay’s potato chips, Doritos tortilla chips, Cheetos cheese-flavored snacks, Tostitos tortilla chips, branded dips, Ruffles potato chips, Fritos corn chips, and Santitas tortilla chips. The company’s Quaker Foods North America segment provides Quaker oatmeal, grits, rice cakes, oat squares, and natural granola; and Aunt Jemima mixes and syrups, Quaker Chewy granola bars, Cap'n Crunch cereal, Life cereal, and Rice-A-Roni side dishes. Its Latin America Foods segment offers snack foods under the Doritos, Cheetos, Marias Gamesa, Ruffles, Emperador, Saladitas, Lay's, Rosquinhas Mabel, Elma Chips, and Sabritas brands; and cereals and snacks under the Quaker brand. The company’s PepsiCo Americas Beverages segment provides beverage concentrates, fountain syrups, and finished goods under the Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, 7UP, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist, and Diet 7UP brands; and ready-to-drink tea and coffee, and juices. Its PepsiCo Europe segment offers snack foods under the Lay’s, Walkers, Doritos, Cheetos, and Ruffles brands; cereals and snacks under the Quaker brand; beverage concentrates, fountain syrups, and finished goods under the Pepsi, Pepsi Max, 7UP, Diet Pepsi, and Tropicana brands; dairy products under the Domik v Derevne, Chudo, and Agusha brands; and ready-to-drink tea products. The company’s PepsiCo Asia, Middle East and Africa segment provides snack foods under the Lay's, Kurkure, Chipsy, Doritos, Cheetos, and Crunchy brands; cereals and snacks under the Quaker brand; beverage concentrates, fountain syrups, and finished goods under the Pepsi, Mirinda, 7UP, Mountain Dew, Aquafina, and Tropicana brands; and ready-to-drink tea products. The company sells its products to authorized bottlers, independent distributors, and retailers. PepsiCo, Inc. was founded in 1898 and is headquartered in Purchase, New York.

Earnings Per Share : 4.26 P/E Ratio : 22.39 Dividend : 2.62 PEG Ratio : 3.34 Estimated Earnings for Current year : 4.50 Strengths and Weaknesses/Risk Factors : Strengths would include a large focused brand

portfolio, high level of customer loyalty, and extensive experience in mergers. Weaknesses would be the overdependence on the domestic market in USA.

Why Buy : PepsiCo is a company that has one rival, but incredible customer loyalty that makes it a brand tough to compete against. Their stock is one that consistently earns their shareholders a very content profit margin.


16

Bond Information

Apple Incorporated: Coupon Rate : 1.550 Yield to Maturity : 4.748 Maturity Date : 02/07/2020 Taxable or Tax Free : Taxable S&P Rating : AA+

JPMorgan Chase Bank N.A.: Coupon Rate : 1.250 Yield to Maturity : 2.030 Maturity Date : 02/18/2020 Taxable or Tax Free : Taxable S&P Rating : A

Costco Wholesale Corporation: Coupon Rate : 1.750 Yield to Maturity : 1.671 Maturity Date : 02/15/2020 Taxable or Tax Free : Taxable S&P Rating : A+


17

Investment Proposal Final

Documents

Transcript of Investment Proposal Final