Source: FactSet, Wells Fargo Advisors. Performance numbers are through September 30, Past performance is not a guarantee of future results.

Transcription

1 John L. Sheehan, CFA, Equity Sector Analyst Core List Strategy 2017 Third Quarter Review The Core List Strategy (Core or Core List) is comprised of blue chip, industry-leading, companies that we believe can withstand the test of time. The objective is to provide a list of high-quality stocks that can be used to build a well-diversified portfolio or can be used to supplement an existing portfolio. The Core List underperformed the S&P 500 by roughly 200 basis points during the September quarter; while the benchmark, the S&P 500, generated a 4.5% total return for the third quarter, the Core List returned 2.5%. During the third quarter of 2017, the Core List benefited from a relatively solid performance within Industrials, particularly the Machinery segment. While the Information Technology sector was also a positive contributor to the Core List performance, the modest underweight position to Information Technology stocks on the Core List did negatively impact the Core List performance. The Health Care sector was also a negative contributor to Core List Performance as several companies within the Health Care Equipment and Pharmaceuticals sub-industries generated weaker returns. Returns from the Financials sector trailed the benchmark primarily due to stock selection. Conversely, the Energy sector generated positive performance that was in line with the benchmark as crude oil prices generally trended up during the quarter. Returns for most other industry sectors on the Core List were essentially in line with their respective S&P industry sectors. Figure 1: Third Quarter 2017 Core List Sector Holdings and S&P 500 Sector performance* Source: FactSet, Wells Fargo Advisors. Performance numbers are through September 30, Past performance is not a guarantee of future results. Investment and Insurance Products: NOT FDIC Insured NO Bank Guarantee MAY Lose Value Please see pages 7-9 of this report for Important Disclosures, Disclaimers and Analyst Certification Page 1 of 9

2 Core List Quarterly Review October 2017 In addition to the noted underweight position to Information Technology, The Core List performance was negatively impacted by a larger allocation to Consumer Staples and the lack of allocation within the Telecommunication Services sector. On the positive side, the Energy allocation was a positive contributor to the Core List performance. With respect to security selection, recommendations within Information Technology, Health Care, and Financials detracted from performance while security selection within Consumer Staples and Industrials were positive contributors to performance. Returning Value to Shareholders We favor large companies that are considered industry leaders, and in addition companies with strong cashgenerating potential that may have established policies of returning value to shareholders either in the form of share buybacks or with dividend policies that have withstood the test of time. Although it is not a requirement for inclusion in the Core List, many well-established industry-leading companies have historically been habitual dividend-paying companies. Core List stocks continue to be on-target returning value to shareholders in the form of dividends and/or share buybacks. Dividend increases (as a percent increase over the dividend paid the previous year) for Core List stocks averaged 6% in This percentage change includes one energy related company dividend cut. Exclusive of this item, the average percent change in dividends during 2016 was an increase of roughly 8%. When comparing common dividends paid by Core List companies in the twelve months ending September 30, 2017 to the common dividends paid in the twelve months ending December 31, 2016, we note common dividends at 45 companies have increased and dividends at one company are lower (related to a company spin-off completed in June 2016 that resulted in a common dividend adjustment). The number of companies with higher dividends does not include one health care company that declares and pays its common dividend once a year and another health care company that initiated the payment of a common dividend in early Figure 2 details common dividend changes for Core List companies during the first nine months of Page 2 of 9

3 Figure 2: Dividend Changes Through September 30, 2017 C ompany S ymbol Market Cap ($Millions ) Recent Pric e YTD Pric e Change Dividends Paid 12 Months E nded 9/30/17 12/31/16 Percent Change S ec tor Broadcom Limited AVGO $100,254 $ % $4.08 $ % Information T echnology Home Depot, Inc. HD $195,054 $ % $3.56 $ % C ons umer Dis cretionary Lowe's Companies, Inc. LOW $67,881 $ % $1.64 $ % C ons umer Dis cretionary Illinois Tool Works Inc. ITW $52,180 $ % $3.12 $ % Indus trials O racle C orporation ORCL $201,084 $ % $0.76 $ % Information T echnology UnitedHealth G roup Incorporated UNH $187,866 $ % $3.00 $ % Health Care TJX Companies Inc TJX $45,971 $ % $1.25 $ % C ons umer Dis cretionary Accenture Plc Class A ACN $84,712 $ % $2.66 $ % Information T echnology J PMorgan Chase & Co. JPM $341,797 $ % $2.24 $ % F inancials Landstar S ystem, Inc. LS TR $4,144 $ % $0.40 $ % Indus trials Cisco Systems, Inc. CSCO $167,180 $ % $1.16 $ % Information T echnology B B &T C orporation BBT $38,554 $ % $1.32 $ % F inancials P aychex, Inc. PAY X $22,866 $ % $2.00 $ % Information T echnology Medtronic plc MDT $104,696 $ % $1.84 $ % Health Care Apple Inc. AAPL $805,969 $ % $2.52 $ % Information T echnology NextE ra E nergy, Inc. NE E $69,895 $ % $3.93 $ % Utilities U.S. Bancorp US B $91,049 $ % $1.20 $ % F inancials Microsoft C orporation MS FT $588,043 $ % $1.68 $ % Information T echnology Q UALC O MM Incorporated QCOM $79,512 $ % $2.28 $ % Information T echnology V.F. C orporation VFC $25,372 $ % $1.68 $ % C ons umer Dis cretionary Public S torage PSA $37,001 $ % $8.00 $ % R eal E s tate NIKE, Inc. Class B NK E $84,355 $ % $0.72 $ % C ons umer Dis cretionary Walgreens Boots Alliance Inc WBA $74,746 $ % $1.60 $ % Consumer S taples P eps ic o, Inc. PEP $157,640 $ % $3.22 $ % Consumer S taples Becton, Dickinson and Company BDX $44,669 $ % $2.92 $ % Health Care M&T B ank C orporation MTB $24,884 $ % $3.00 $ % F inancials United Technologies C orporation UTX $94,351 $ % $2.80 $ % Indus trials J ohnson & J ohnson J NJ $359,547 $ % $3.36 $ % Health Care C oca-c ola C ompany KO $195,773 $ % $1.48 $ % Consumer S taples Automatic Data Processing, Inc. ADP $50,779 $ % $2.28 $ % Information T echnology Kimberly-Clark Corporation KMB $41,153 $ % $3.88 $ % Consumer S taples Praxair, Inc. PX $40,221 $ % $3.15 $ % Materials Parker-Hannifin Corporation PH $23,642 $ % $2.64 $ % Indus trials S ysco C orporation SYY $28,585 $ % $1.32 $ % Consumer S taples S outhern Company SO $50,214 $ % $2.32 $ % Utilities Aflac Incorporated AFL $33,113 $ % $1.72 $ % F inancials E xxon Mobil C orporation XOM $348,544 $ % $3.08 $ % E nergy Procter & G amble Company PG $233,933 $ % $2.76 $ % Consumer S taples Colgate-Palmolive Company CL $64,213 $ % $1.60 $ % Consumer S taples Wal-Mart S tores, Inc. WMT $251,801 $ % $2.04 $ % Consumer S taples O mnicom G roup Inc OMC $17,180 $ % $2.20 $ % C ons umer Dis cretionary Merck & Co., Inc. MR K $175,791 $ % $1.88 $ % Health Care Abbott Laboratories ABT $96,254 $ % $1.06 $ % Health Care E mers on E lectric C o. E MR $40,587 $ % $1.92 $ % Indus trials C hevron C orporation CVX $225,126 $ % $4.32 $ % E nergy Novartis AG S ponsored ADR * NVS $200,879 $ % $2.31 $ % Health Care Allergan plc AGN $69,299 $ % $2.80 $ % Health Care Alphabet Inc. Class A GOOGL $684,423 $ % $0.00 $ % Information T echnology Apache C orporation APA $16,174 $ % $1.00 $ % E nergy E OG R esources, Inc. EOG $55,880 $ % $0.67 $ % E nergy Kinder Morgan Inc Class P KMI $42,262 $ % $0.50 $ % E nergy Danaher C orporation DHR $60,557 $ % $0.56 $ % Health Care A verage 11.4% S ource: FactS et data and Wells Fargo A dvisors. Prices as of 10/10/17. * Novartis ' dividend reflects a 15% foreign tax withholding; gros s dividend is $2.75 per s hare. Page 3 of 9

4 C ompany S ymbol R ecent Price Indicated Dividend Dividend Yield Market C ap ($mil) E nterprise Value ($mil) 52 W eek High 52 W eek Low S ub-industry Group C onsumer Discretionary Home Depot, Inc. HD $ $ % 195, ,831 $ $ Home Improvement R etail Lowe's Companies, Inc. LOW $ $ % 67,881 81,810 $ $ Home Improvement R etail NIKE, Inc. Class B NK E $ $ % 84,355 82,956 $ $ F ootwear Omnicom Group Inc OMC $ $ % 17,180 20,947 $ $ Advertising TJ X C ompanies Inc TJ X $ $ % 45,971 45,248 $ $ Apparel R etail V.F. C orporation VFC $ $ % 25,372 28,006 $ $ Apparel Accessories & Luxury Goods C onsumer S taples Coca-Cola Company KO $ $ % 195, ,151 $ $ S oft Drinks Colgate-Palmolive Company CL $ $ % 64,213 69,666 $ $ Household P roducts Kimberly-Clark Corporation K MB $ $ % 41,153 48,401 $ $ Household P roducts P epsic o, Inc. PEP $ $ % 157, ,397 $ $ S oft Drinks Procter & Gamble Company PG $ $ % 233, ,687 $ $ Household P roducts S ysco Corporation SYY $ $ % 28,585 35,601 $ $ F ood Distributors Walgreens Boots Alliance Inc WBA $ $ % 74,746 82,587 $ $ Drug R etail Wal-Mart Stores, Inc. WMT $ $ % 251, ,144 $ $ Hypermarkets & S uper Centers E nergy Apache Corporation APA $ $ % 16,174 24,352 $ $ Oil & Gas E xploration & P roduction Chevron Corporation CVX $ $ % 225, ,400 $ $ Integrated Oil & G as E OG Resources, Inc. E OG $ $ % 55,880 61,218 $ $ Oil & Gas E xploration & P roduction E xxon Mobil C orporation XOM $ $ % 348, ,098 $ $ Integrated Oil & G as Kinder Morgan Inc Class P KMI $ $ % 42,262 80,943 $ $ Oil & Gas S torage & Transportation Financials Aflac Incorporated AFL $ $ % 33,113 34,037 $ $ Life & Health Insurance BB&T Corporation BBT $ $ % 38,554 66,909 $ $ R egional B anks J P Morgan C hase & C o. JPM $ $ % 341, ,719 $ $ Diversified Banks M&T Bank Corporation MTB $ $ % 24,884 34,021 $ $ R egional B anks U.S. Bancorp US B $ $ % 91, ,024 $ $ Diversified Banks Health C are Abbott Laboratories ABT $ $ % 96, ,636 $ $ Health Care E quipment Allergan plc AGN $ $ % 69,299 98,696 $ $ Pharmaceuticals Becton, Dickinson and Company BDX $ $ % 44,669 49,816 $ $ Health Care E quipment Danaher Corporation DHR $ $ % 60,557 71,427 $ $ Health Care E quipment J ohnson & J ohnson J NJ $ $ % 359, ,107 $ $ Pharmaceuticals Medtronic plc MDT $ $ % 104, ,734 $ $ Health Care E quipment Merck & Co., Inc. MR K $ $ % 175, ,477 $ $ Pharmaceuticals Novartis AG S ponsored ADR NVS $ $ % 200, ,835 $ $ Pharmaceuticals UnitedHealth Group Incorporated UNH $ $ % 187, ,414 $ $ Managed Health Care Indus trials E merson E lectric Co. E MR $ $ % 40,587 42,666 $ $ E lectrical C omponents & E quipment Illinois Tool W orks Inc. ITW $ $ % 52,180 57,738 $ $ Industrial Machinery Landstar System, Inc. LSTR $ $ % 4,144 4,022 $ $ Trucking Parker-Hannifin Corporation PH $ $ % 23,642 28,595 $ $ Industrial Machinery United Technologies Corporation UTX $ $ % 94, ,751 $ $ Aerospace & Defense Information Technology Accenture Plc Class A ACN $ $ % 84,712 82,338 $ $ IT C onsulting & Other S ervices Apple Inc. AAPL $ $ % 805, ,839 $ $ Technology Hardware S torage & Peripherals Automatic Data Processing, Inc. ADP $ $ % 50,779 49,932 $ $ Data Processing & Outsourced S ervices Broadcom Limited AVGO $ $ % 100, ,049 $ $ S emiconductors Cisco Systems, Inc. CSCO $ $ % 167, ,363 $ $ C ommunic ations E quipment Alphabet Inc. Class A GOOGL $ $ , ,911 $ 1, $ Internet S oftware & S ervices Microsoft Corporation MSFT $ $ % 588, ,330 $ $ S y s tems S oftware Oracle Corporation ORCL $ $ % 201, ,005 $ $ S y s tems S oftware P aychex, Inc. PAYX $ $ % 22,866 22,561 $ $ Data Processing & Outsourced S ervices QUALCOMM Incorporated QCOM $ $ % 79,512 80,614 $ $ S emiconductors Materials Praxair, Inc. PX $ $ % 40,221 49,521 $ $ Industrial Gases R eal E state Investment Trusts (R E ITs) Public Storage PSA $ $ % 37,001 41,799 $ $ S pecialized R E ITs Utilities NextEra Energy, Inc. NEE $ $ % 69, ,057 $ $ E lectric Utilities S outhern Company SO $ $ % 50, ,009 $ $ E lectric Utilities *E stimates are consensus estimates from Factset. Please note that the price quote is not live. Prices as of 10/10/17 Dividends are not guaranteed and are subject to change or elimination. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in the list. S ource: FactS et data and W ells Fargo Advisors. Page 4 of 9

5 C ompany S ymbol EPS Estimates * R ecent Price FY1 FY2 FY1 FY2 3-yr Avg P/E E s t. L-T Growth R ate PEG (FY2) Debt to C apital R atio (%) Price to Book Fis cal Year E nd Las t R eported R es ults C onsumer Discretionary Home Depot, Inc. HD $ $ 7.31 $ % J an 08/15/2017 Lowe's Companies, Inc. LOW $ $ 4.50 $ % J an 08/23/2017 NIKE, Inc. Class B NK E $ $ 2.33 $ % J an 09/27/2017 Omnicom Group Inc OMC $ $ 5.05 $ % Dec 07/20/2017 TJ X C ompanies Inc TJ X $ $ 3.93 $ % J an 08/15/2017 V.F. C orporation VFC $ $ 2.98 $ % Dec 07/24/2017 C onsumer S taples Coca-Cola Company KO $ $ 1.90 $ % Dec 07/26/2017 Colgate-Palmolive Company CL $ $ 2.89 $ % N/A Dec 07/21/2017 Kimberly-Clark Corporation K MB $ $ 6.21 $ % Dec 07/25/2017 P epsic o, Inc. PEP $ $ 5.22 $ % Dec 10/04/2017 Procter & Gamble Company PG $ $ 4.17 $ % J une 07/27/2017 S ysco Corporation SYY $ $ 2.76 $ % J une 08/14/2017 W algreens Boots Alliance Inc WBA $ $ 5.01 $ % Aug 06/29/2017 W al-mart S tores, Inc. W MT $ $ 4.37 $ % J an 08/17/2017 E nergy Apache Corporation APA $ $ 0.04 $ % (4.96) Dec 08/03/2017 Chevron Corporation CVX $ $ 4.00 $ % Dec 07/28/2017 E OG Resources, Inc. E OG $ $ 0.66 $ % (3.63) Dec 08/02/2017 E xxon Mobil Corporation XOM $ $ 3.44 $ % Dec 07/28/2017 Kinder Morgan Inc Class P KMI $ $ 0.64 $ % Dec 07/20/2017 Financials Aflac Incorporated AFL $ $ 6.69 $ % nmf Dec 07/28/2017 BB&T Corporation BBT $ $ 2.80 $ % Dec 07/20/2017 J P Morgan C hase & C o. JPM $ $ 6.79 $ % Dec 07/14/2017 M&T Bank Corporation MTB $ $ 9.27 $ % Dec 07/19/2017 U.S. Bancorp US B $ $ 3.42 $ % Dec 07/19/2017 Health C are Abbott Laboratories ABT $ $ 2.49 $ % Dec 07/20/2017 Allergan plc AGN $ $ $ % J an 08/03/2017 Becton, Dickinson and Company BDX $ $ 9.46 $ % S ept 08/03/2017 Danaher Corporation DHR $ $ 3.95 $ % S ept 07/20/2017 J ohnson & J ohnson J NJ $ $ 7.18 $ % Dec 07/18/2017 Medtronic plc MDT $ $ 4.66 $ % J an 08/22/2017 Merck & Co., Inc. MR K $ $ 3.87 $ % Dec 07/28/2017 Novartis AG S ponsored ADR NVS $ $ 4.75 $ % Dec 07/18/2017 UnitedHealth Group Incorporated UNH $ $ 9.86 $ % Dec 07/18/2017 Indus trials E merson E lectric C o. E MR $ $ 2.61 $ % S ept 08/01/2017 Illinois Tool W orks Inc. ITW $ $ 6.46 $ % Dec 07/24/2017 Landstar S ystem, Inc. LS TR $ $ 3.61 $ % Dec 07/27/2017 Parker-Hannifin Corporation PH $ $ 9.10 $ % J an 08/03/2017 United Technologies Corporation UTX $ $ 6.57 $ % Dec 07/25/2017 Information Technology Accenture Plc Class A ACN $ $ 6.55 $ % Aug 09/28/2017 Apple Inc. AAPL $ $ 8.99 $ % S ep 08/02/2017 Automatic Data Processing, Inc. ADP $ $ 3.82 $ % J une 07/27/2017 Broadcom Limited AVGO $ $ $ % J uly 08/25/2017 Cisco Systems, Inc. CSCO $ $ 2.43 $ % J uly 08/17/2017 Alphabet Inc. Class A GOOGL $ $ $ % J uly 07/25/2017 Microsoft Corporation MS FT $ $ 3.19 $ % J une 07/21/2017 Oracle Corporation ORCL $ $ 2.93 $ % J uly 09/15/2017 P aychex, Inc. PAYX $ $ 2.39 $ % May 10/03/2017 QUALCOMM Incorporated QCOM $ $ 4.17 $ % S ept 07/20/2017 Materials Praxair, Inc. PX $ $ 5.74 $ % Dec 07/27/2017 R eal E state Investment Trusts (R E ITs) Public S torage PSA $ $ $ % Dec 07/27/2017 Utilities NextE ra E nergy, Inc. NE E $ $ 6.74 $ % Dec 07/26/2017 S outhern Company SO $ $ 2.94 $ % Dec 08/02/2017 *E stimates are consensus estimates from Factset. Please note that the price quote is not live. Prices as of 10/10/17 Dividends are not guaranteed and are subject to change or elimination. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in the list. E PS estimates for Public S torage represent estimated Funds From Operations (FFO) S ource: FactS et data and W ells Fargo Advisors. P/E Page 5 of 9

6 Core Resources We provide a wide variety of resources to assist you and your Financial Advisor in developing a welldiversified portfolio. These resources include, but not limited to the following reports: Core List by Sector. The Core List By Sector is an easy to read representation of the Core List separated by sectors. This list is useful when equity ideas are needed for building portfolios from scratch, rebalancing or adjusting portfolio sector weightings. Sample Portfolio. The Sample Portfolio was a tool developed to demonstrate how the Core Recommendations can be utilized to create a list of stocks to build a portfolio. Although all equities on the Core List are suitable for inclusion in the Concept Portfolio (or any portfolio) at any given time, we evaluate the Concept Portfolio on a monthly basis and make appropriate changes to that list to reflect more shorter-term market, company and/or industry factors. Quarterly Performance Reports. The performance of the Core List is published on a quarterly basis, benchmarked against the S&P 500. In simple terms, the calculation of the performance of the list spans from the time a stock is added to the list to the time that it is removed. How can you participate? Tell your financial advisor that you would like to invest in companies that are included in the Core List. Work together to construct a well-diversified portfolio of an appropriate number of stocks based on the size of your portfolio. Select stocks from at least eight sectors of the eleven S&P 500 sectors spread across several industry groups. Although diversification is an important tool for helping to reduce risk, having a large number of individual stocks in your portfolio makes it increasingly difficult to keep track of each security's progress. In addition, if one stock represents only a fraction of the value of your portfolio, it will have less impact on the total return of your portfolio. Diversification does not guarantee a profit or protect against loss. Each client s needs are different. You and your financial advisor should determine whether a particular stock is suitable for you, keeping in mind how the stock will fit into your existing portfolio. Risks Although we believe that the companies on the Core List are outstanding companies with superior track records, past performance does not guarantee future results. We cannot be sure that the track record for these companies will remain superior. It is also possible that whatever superior traits the companies possess are entirely reflected in their stocks market prices. In that case, even superior operating results may lead to investment losses or returns that are not superior. There will be times when the stocks of companies that have less impressive track records may outperform stocks of better companies. New companies, or newly public companies with no track records, will not qualify for the Core list. Yet these more speculative stocks may provide superior returns in exchange for the assumption of more risk. Smaller companies, in general, may also provide superior performance for periods of time. The Core list generally includes large companies; a portfolio of Core stocks will not capture small-stock performance. The prices of small and mid-cap company stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions. Investors who invest solely in a portfolio of Core stocks face benchmark risk. Some sectors and industries will have more companies that meet the requirements for the Core list than will others. Conversely, some economic sectors will be more heavily represented in the S&P 500 index, or other indexes, than they are on the Core list. If the stocks in the sectors that are more heavily represented in various indexes were to turn in strong performances, it would be difficult for a portfolio of Core stocks to match or beat the index returns. Page 6 of 9

7 Definitions To provide a more complete picture about the companies on the Core List Strategy, we offer a few statistics about the companies from Factset. Bear in mind that prices and estimates are constantly changing, so as soon as we publish these numbers they re outdated. Market capitalization (cap): Diluted shares outstanding multiplied by the price. It s a measure of how large a company is and the stake that common shareholders have in the total enterprise. Current Dividend Yield: The current indicated dividend per share of a stock divided by its current price per share. For example, a stock with a price of $100 per share paying an indicated dividend of $5 per share annually would have a dividend yield of 5%. For the Dividend Changes statistics a harmonic average was applied, which is the mean of a set of positive variables calculated by dividing the number of observations by the reciprocal of each number in the series. Since the harmonic mean of a list of numbers tends to lean strongly toward the least elements of the list, it tends (compared to the arithmetic mean) to mitigate the impact of large outliers and exacerbate the impact of small ones. Also known as "harmonic mean". Enterprise value: A measure of the total size of a company. It s calculated by taking market capitalization plus debt, preferred shares and other equity stakes minus cash and cash equivalents. For banks and firms with a lot of debt, the enterprise value will be substantially larger than the market cap. For firms with a lot of cash, the enterprise value will be smaller than the market cap. Industry Group: As defined by S&P. Periodically, our Equity Strategists publish a list of industry groups that appear attractive over the short-term. Although we try to represent all sectors and industries, we use this information to better gauge particular industry outlook for equity inclusion and/or exclusion decisions. EPS Estimates, FY1, FY2: Consensus EPS estimates for the current uncompleted fiscal year (FY1) and for the next fiscal year (FY2). P/E: Price to earnings ratio based on FY1 and FY2 consensus estimates. A commonly used valuation metric. P/Es vary widely by sector. Three-year average P/E: The average price to earnings ratio during the last three years. Estimated Long-Term Growth Rate: From First Call, the analyst consensus estimate for the firm s long-term (five years or more) growth rate. In our experience, analysts tend to overestimate the growth potential for their companies and this number tends to be too high. PEG (P/E to Long-Term Growth Rate): A metric favored by some value investors who look to buy companies with a favorable long-term growth rate and attractive valuation or a PEG of less than 1. We calculate the PEG using the First Call estimated longterm growth rate and price to earnings ratio on next 12 months earnings. In our experience, a PEG ratio is helpful in industries where growth is relatively steady in a wide range of economic conditions. PEG ratios are not particularly helpful for cyclical sectors (energy, materials), slow growth sectors (financials), in situations where earnings are volatile (an early stage tech or biotech company), or growth is slowing significantly (a maturing technology company). Debt to capital ratio: A measure of how much debt an enterprise has versus it entire capital base. The capital base includes shareholders equity and debt. A lower number is generally better. Price to book value: A valuation metric that compares the company s price to its book value. Book value is what is left over after subtracting liabilities from assets. This metric can be misleading if a company has a large amount of goodwill (which is treated as an asset) or the value of its assets is declining. Fiscal year end: The month in which a company s fiscal year ends. Last reported results: The date the company last reported its quarterly results. U.S. companies typically report quarterly while some European and companies report semi-annually. Notes All estimates contained in this report are consensus estimates from sources believed to be reliable. Page 7 of 9

8 IMPORTANT DISCLOSURES: Disclosure information... For important disclosure information, please contact: Wells Fargo Advisors Attn: Advisory Services (Disclosure Information) One North Jefferson, St. Louis, MO Or call phone (888) Please remember to specify the issuer(s) with respect to which you would like to receive disclosure information. ANALYST CERTIFICATION: The Analyst who prepared this report hereby certifies that the views expressed in this report accurately reflect his/her personal views about the subject companies and their securities. The Analyst also certifies that he/she has not been, is not, and will not be receiving direct or indirect compensation for expressing the specific recommendation(s) or view(s) in this report. Disclaimers Pricing as of October 10, 2017, unless otherwise noted. Dividends can be increased, decreased or totally eliminated at any point without notice. The prices of mid-cap company stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation and political and economic changes. This may result in greater share price volatility. These risks are heightened in emerging markets. Investments in the energy sector are subject to the adverse economic events within that industry. A downturn in the energy sector of the economy, adverse political, legislative or regulatory developments or other events could have a large impact on a portfolio s investments in this sector. Technology and Internet-related stocks, especially of smaller, less-seasoned companies, tend to be more volatile than the overall market. American depositary receipt (ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on American markets just like regular stocks, and are issued/sponsored in the U.S. by a bank or brokerage. If the home currency is devalued, this can result in a loss to the ADR holder, even if the company had been performing well. Wells Fargo Advisors publishes several theme-based lists of recommended equity securities. Each list is based on a specific investment objective and time horizon which may be different from the other lists. This may cause Wells Fargo Advisors to recommend an equity security to be added to one list and removed from another list. Thus, one list may contain different recommendations or conclusions that could result in short-term price movements contrary to the recommendations in another list. Wells Fargo Advisors research analysts receive no compensation in connection with the firm s investment banking, sales and trading, or principal trading revenues. Analysts may be eligible for annual bonus compensation based on the overall profitability of the firm, which takes into account revenues derived from all the firm s business activities, including its investment banking business, sales and trading, and principal trading. The Advisory Services Group (ASG) of Wells Fargo Advisors works with information received from various resources including, but not limited to, research from affiliated and unaffiliated research correspondents as well as other sources. ASG research analysts provide investment advice based on their own observations and analysis (both fundamental and quantitative) for the clients of Wells Fargo Advisors and its affiliates. ASG does not assign ratings to or project target prices for any of the securities mentioned in this report. ASG receives research from affiliated and unaffiliated correspondent research providers with which Wells Fargo Advisors has an agreement to obtain research reports. Each correspondent research report reflects the different assumptions, opinions, and the methods of the analysts who prepare them. Any opinions, prices or estimates contained in this report is as of the date of this publication and is subject to change without notice. Additional information available upon request. Past performance is not a guide to future performance. The material contained herein has been prepared from sources and data we believe to be reliable but we make no guarantee as to its accuracy or completeness. This material is published solely for informational purposes and is not an offer to buy or sell or a solicitation of an Page 8 of 9

9 offer to buy or sell any security or investment product. Opinions and estimates are as of a certain date and subject to change without notice. Wells Fargo Advisors is registered with the U.S. Securities Exchange Commission and the Financial Industry Regulatory Authority, but is not licensed or registered with any financial services regulatory authority outside of the U.S. Non-U.S. residents who maintain U.S.-based financial services account(s) with Wells Fargo Advisors may not be afforded certain protections conferred by legislation and regulations in their country of residence in respect of any investments, investment transactions or communications made with Wells Fargo Advisors. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC, and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company Wells Fargo Advisors, LLC. All rights reserved. Page 9 of 9