AlphaProfit Sector Investors Newsletter December 10, Scorecard

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1 WHAT S INSIDE Scorecard... 1 Portfolio Composition... 2 Sector Crosscurrents... 2 Fund Returns... 3 Outlook... 4 Top 10 Fund Holdings... 4 Fund Exchanges Core Portfolio: None Focus Portfolio: None Scorecard AlphaProfit Core and Focus portfolios were up 1.1% and 1.2%, respectively, for November compared to the Wilshire 5000's gain of 1.4%. AlphaProfit SP Indicator Reading: Wait The recovery which has been termed jobless until now also appeared to turn the corner as the unemployment rate fell to 6.0% and initial unemployment claims consistently stayed below the 400,000 AlphaProfit SP Indicator... 5 Fund Facts and News... 7 Long Term Performance... 8 Glossary of Terms Used... 9 Nov % 1.1% 1.4% 25.5% AlphaProfit Sector Investors Newsletter (ISSN: ) is published monthly by AlphaProfit Investments, LLC. To subscribe or to learn more about AlphaProfit I n v e s t m e n t s, v i s i t h t t p : / / For a limited time, AlphaProfit Sector Investors Newsletter is being offered free of charge. Copyright 2003 AlphaProfit Investments, LLC. All rights reserved. No part of this document may be reproduced in any manner without written permission of AlphaProfit Investments, LLC. AlphaProfit Investments, LLC uses the proprietary ValuM Investment Process to select sectors for investment in the AlphaProfit Sector Investors Newsletter model portfolios. This process evaluates sectors based on their valuation, momentum, and news flow quality. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from Fidelity Investments. Owners and employees of AlphaProfit Investments, LLC may for their own accounts buy, sell, or hold long or short positions in any of the Fidelity Funds or securities mentioned in this newsletter. 2H03-T-D November Churns. November's rather subdued return, following a torrid pace to the upside in October, masks the underlying volatility and activity that took place to consolidate the recent gains in the equity market. The news flow on the economic front was positive as the U. S. economic recovery appeared to gain further ground. The Commerce department revised the third quarter growth in the gross domestic product upward from 7.2% to 8.2%, a pace last exceeded only in % 15.4% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Wilshire 5000 Core Portfolio Focus Portfolio benchmark. Productivity rose at an 8.1% annual rate during the third quarter, the most since the first three quarters of Meanwhile, Corporate America drew the third quarter earnings parade to a close with quarterly results rising more than 20.0% on average. Positive news on the economic front was countered by negative Seasons Greetings from the staff of AlphaProfit Investments, LLC! We wish you a wonderful holiday season and a prosperous Volume 1, Number 3 Page 1

2 Portfolio Composition AlphaProfit Focus Portfolio Our Focus Portfolio was last repositioned at the close of business on June 30, We are leaving our Focus portfolio unchanged at this time. Fidelity Fund Holding June 30, 2003 November 30, 2003 (Ticker Symbol) Amount Invested Percent Portfolio Value Percent Portfolio Networking (FNINX) $327, % $409, % Wireless (FWRLX) $327, % $412, % Total $654, % $821, % AlphaProfit Core Portfolio Our Core Portfolio was last repositioned at the close of business on June 30, We are leaving our Core portfolio unchanged at this time. Fidelity Fund Holding June 30, 2003 November 30, 2003 (Ticker Symbol) Amount Percent Value Percent Invested Portfolio Portfolio Cons. Ind. (FSCPX) $36, % $39, % Leisure (FDLSX) $40, % $45, % Multimedia (FBMPX) $40, % $45, % Retailing (FSRPX) $37, % $43, % Networking (FNINX) $58, % $73, % Wireless (FWRLX) $58, % $73, % Spartan 500 (FSMKX) $110, % $121, % Total $383, % $442, % news flow on several fronts, most notably geopolitics, mutual funds, and trade. On the geopolitical front, all was not well as U. S. troop casualties in Iraq ticked up. Bombings in Riyadh and Istanbul were reported during the first-half of the month. Elliot Spitzer became the two most dreaded words in the mutual fund industry. Allegations of mutual funds allowing improper trading practices became more widespread as Alliance Capital, American Express, Prudential, and Charles Schwab received subpoenas related to government investigations. The heads of PBHG Funds, Putnam Investments, and Strong Funds resigned while senior executives at Alliance Capital were ousted. On the trade front, concerns about a trade war escalated as friction rose between the U. S. and China on textiles and the U. S. and other developed nations on steel. Against this backdrop, even the strong showing on the economic front could not garner adequate bulls for the U. S. dollar. One had to part with $1.20 for a Euro, a level not seen since the Euro debuted five years ago. There was some speculation that billionaire investors, Warren Buffett and George Soros had taken positions to benefit from a falling dollar. The declining greenback provided a field day for gold, which made a run at the $400/oz. mark to establish a seven year high. As the month drew to a close, strong reports on the economic and earnings front effectively countered some of the bearish undercurrents that had crept in during the earlier part of the month and helped our portfolios as well as the Wilshire 5000 tack on some gains. Since June 30, 2003, the AlphaProfit portfolios are comfortably ahead of the Wilshire 5000, despite lagging behind the unmanaged index for this month. Sector Crosscurrents (Relevant stock ticker symbol and Fidelity Fund in parentheses.) The month was characterized by two themes. First, investors showed more liking for quality, defensive names. High fliers that were at the top of the winning list since July gave back some of their gains, with JetBlue (JBLU-FDLSX) and Ericsson (ERICY-FWRLX) being the most notable, with losses of about 5.0% each. Likewise, shares that were lining the bottom of the pole reversed course to the top, the most notable being Vodafone (VOD-FWRLX) with a gain of over 10.0%. Second, the spread in returns between winners and losers was fairly narrow with Agilent Technologies' (A-FNINX) return of 13.5% getting it top honors for the month and Seagate Technology's (STX-FNINX) loss of 14.1% placing it at the bottom of the return pole. Agilent tests profitability. Agilent (A-FNINX) reported its first profit since Orders and revenue in the company's four business units -- test and measurement, automated test, semiconductor and life sciences and chemical analysis -- all rose from prior quarter levels as demand perked up. The company also benefited from cost reduction achieved through its restructuring program. In addition to laying off about 7,000 employees, the company lowered its research and development spending as well as capital expenditures. Investors liked the earnings report and elevated the company's shares for a 13.5% gain. Vodafone shares finally strike a chord. After languishing for some months, shares of well-financed cellular phone service provider, VOD finally struck a chord with investors to rake in a 10.4% gain and place it second on the list of companies we track. VOD delivered strong double-digit growth in revenue and earnings for the first six months. The company increased dividends by 20% and allocated 2.5 billion pounds to a share buy-back program. VOD also passed the 125 Volume 1, Number 3 Page 2

3 Cons. Ind Leisure Multimedia Retailing Networking Wireless Spartan 500 Wilshire 5000 Cons. Ind Leisure Multimedia Retailing Networking Wireless Spartan 500 Wilshire % Fund Returns November % 0.8% 0.9% 1.4% 1.7% 1.7% 1.9% 0% 1% 2% 3% 2H2003-To-Date 9.8% 9.3% 12.3% 11.0% 11.6% 15.2% 25.1% 26.0% 0% 5% 10% 15% 20% 25% 30% The funds held within our model portfolios moved in relatively modest proportions during the month of November. Select Leisure was the best performing fund with a return of 1.9%, a figure only higher by 1.5% than the bottom performer Select Multimedia, at 0.4%. Three of our Core Portfolio holdings outperformed the unmanaged Wilshire 5000's return of 1.4% whereas the remaining four underperformed the index. In the Focus Portfolio, Select Networking clocked ahead of the Wilshire 5000 whereas Select Wireless lagged. Investments in Select Networking and Select Wireless continue to drive our portfolio performances with returns of 25.1% and 26.0%, respectively for the 2H2003-To-Date period. Among our consumer focused funds, the more aggressive holdings in Select Leisure and Select Retailing have outperformed the Wilshire Select Multimedia and Select Consumer Industries trail the returns of the Wilshire 5000 index. million proportionate customer mark and expects to grow this number by 10% during the next year. Cisco grows its network. Cisco Systems (CSCO-FNINX) reported a record quarterly profit and highest sales in almost three years. On a pro forma basis, excluding certain costs, the networking giant reported earnings in the latest quarter of 17 cents a share beating Wall Street analysts estimates of 15 cents a share. CSCO's management ex- pects next quarter sales to show a 10% year-over-year increase. The cautious optimism expressed by CSCO management did not go unnoticed on Wall Street. Investors pushed CSCO higher by 8.5% for the month and placed the company fourth on the list we track. Liberty Media to liberate itself from debt. Investors applauded Liberty Media's (L-FBMPX, FDLSX) announcement that the company plans to reduce debt by $4.5 billion before the end of The above plan includes a target of cutting debt by $2.5 billion before the end of Credit rating agencies Fitch and Moody's reaffirmed their investment grade ratings on L's debt. Equity investors pushed up the company s shares by 9.5%. Disk-drive cracks. Shares of diskdrive manufacturer, Seagate Technology (STX-FNINX) and disk drive chip manufacturer, Marvell Technology (MRVL-FNINX) weighed in with losses of 14.1% and 9.9%, respectively. STX continued to suffer from the follow-through effects of the announcements late last month. Subscribers will recall that STX mentioned price competition in the hard disk-drive world to be heating up. The Securities and Exchange Commission has requested the company to provide all analyst reports written between January 2000 and August STX shares also suffered from an analyst downgrade this month. Despite posting forecast beating third-quarter results MRVL tumbled after the company failed to raise its fourth-quarter revenue estimate. The company said that its fourthquarter revenue will grow between 10 to 12% on a sequential basis, basically in line with analysts expectations. Further, the company is seeing a shift in its customer base from companies to consumers, resulting in a declining profit margin. The forecast of a slimming profit margin only added to MRVL's unpopularity with investors. MRVL's performance in November was only better than that of STX in the list we Volume 1, Number 3 Page 3

4 track. Fewer lines at Wal-Mart. Wal-Mart (WMT-FSRPX, FSCPX, FSMKX) reported relatively disappointing results for the third quarter with the company earning 46 cents a share, a penny shy of estimates. Same store sales, a key performance metric for retailers, rose a relatively robust 6.1%. However, investors were spooked with WMT's forecast of cents in earnings per share for the fourth quarter, a forecast shy of analyst estimates at 65 cents per share. WMT traded down 5.6% for the month. Among stocks widely held by funds in our portfolio, Time Warner (TWX-FSCPX, FBMPX, FDLSX) entertained a 6.5% gain. TWX confirmed that it sold its recorded music and music publishing business for $2.6 billion to an investor group while retaining a right to buy back a minority stake in the business. TWX apparently is considering to untangle its partnerships with Comcast Corp. (CMCSA-FDLSX); this move could potentially enable TWX to partially spin-off its cable operations. The underperformance and valuation of Viacom's (VIA-FSCPX, FBMPX, FDLSX) shares prompted some analysts to upgrade its shares. VIA shares still shed 1.2% for the month. Outlook Corporations appear to be loosening their purse strings on capital spending. This combined with sector-specific dynamics bodes well for our Select Networking and Select Wireless holdings. The recent GDP report indicates that business fixed investment, which includes spending on commercial construction as well as equipment and software, rose at a 16.7% annual rate in the third quarter. This figure was revised upward from an estimated 14.0% increase. Spending on software and equipment rose a strong 18.4%. Select Networking Corporate IT spending appears to be on the increase as companies Top 10 Fund Holdings As of September 30, 2003, these stocks made the top 10 list in the Fidelity Select Funds held by the Core and Focus portfolios. Cons. Ind. (FSCPX) Leisure (FDLSX) Multimedia (FBMPX) Coca Cola Comcast Cl A InterActiveCorp Procter & Gamble McDonalds Yahoo Disney (Walt) Jetblue Airways Liberty Media Cl A Wal Mart Stores Time Warner Clear Channel Comm. Viacom Inc Cl B Viacom Inc Cl B Viacom Inc Cl B Home Depot Liberty Media Cl A Disney (Walt) Time Warner Kerzner International Cablevision Sys Grp A Dow Jones & Co Clear Channel Comm. General Motors Cl H Safeway Lastminute.Com Omnicom Group Fox Entmt Cl A Fox Entmt Cl A Time Warner 40.3% of fund 37.8% of fund 60.0% of fund Retailing (FSRPX) Networking (FNINX) Wireless (FWRLX) McDonalds Cisco Systems Nextel Comm. Cl A Home Depot Agilent Technologies Qualcomm CVS Agere Systems Cl A Vodafone ADR Safeway Marvell Tech. Grp. Ericsson (LM) ADR Wal Mart Stores Seagate Technology American Tower Cl A Big Lots Microsoft Motorola Limited Brands Avaya AT&T Wireless Svc. Duane Reade Adtran Alltel Petsmart Scientific-Atlanta Comverse Tech. Kroger Networks Associates Crown Castle Intl 58.0% of fund 52.8% of fund 55.5% of fund Spartan 500 (FSMKX) Microsoft General Electric Wal Mart Stores Exxon Mobil Pfizer Citigroup Intel Intl Bus Mach Amer Intl Group Johnson & Johnson 23.6% of fund The last update on individual fund holdings available from Fidelity Investments is as of September 30, As of this date, Time Warner, Viacom, and Wal-Mart were most widely held by funds in the Core Portfolio with each of these companies held by 3 of the Core Portfolio funds. Companies with media and travel related assets were prominent in the holdings of the Select Consumer Industries, Select Leisure, and Select Multimedia funds. There was no overlap in the holdings of the funds held by the Focus Portfolio. position themselves for a recovering economy. Comments from CEOs of major technology companies like Intel as well as industry data suggest that things are lining up well for the networking sector. Intel CEO Craig Barrett said, he saw "indications around the world of a re-growth of information technology. Governments in Asia and Europe were starting to invest in their technology infrastructure." Demand for PCs, particularly notebook computers as well as networking gear appears to be strong as upgrade cycles begin to take hold. The end demand trends are supported by demand seen in global chip sales that increased 6.5% in September to $14.4 billion, the largest monthly increase since These trends supported by a macroeconomic backdrop of increasing capital spending augurs Volume 1, Number 3 Page 4

5 well for Select Networking. Select Wireless On November 24, the Federal Communications Commission (FCC) approved rules that make it possible for consumers to keep their cell phone numbers when they switch wireless service providers. Consumers can also transfer their landline phone number to their cell phone, should they decide to go totally wireless. These rules went into effect for customers in the top 100 metropolitan markets, with the rest of the nation to follow suit on March 24. This development provides opportunities for superior, well-differentiated wireless service providers like Nextel, the top holding in Select Wireless, to increase revenues by raising customer count. Earlier this month, the FCC set apart a new slice of air waves for wireless Internet users (i.e., Wi-Fi). Companies successful in increasing the number of quality, affluent data service users are likely to benefit from this development. Companies like Vodafone, with its strong balance sheet are well-positioned to participate in the secular growth characteristics of the wireless market. All said, we remain optimistic about the prospects for Select Wireless. While macroeconomic factors are less than optimal for our consumer related holdings, we hold on to them for now, based on sector-specific dynamics. The consumer is holding her own for now and the consumer confidence data being reported are reasonably robust. Consumer spending grew at a 6.4% annual rate from July through September, a bit slower than the previous estimate of a 6.6% increase. The punch in consumer spending however may be ebbing. Wal-Mart's CEO Lee Scott commented at a company conference call that he does not see strength in consumer spending and that consumers are living paycheck to paycheck. With interest rates ticking up, there is no continued stimulus being provided via mortgage refinancing. The one-time boost from tax cuts appears to have run its course. While the job market is on a mend, significant strides in productivity improvement continue to place downward pressure on the number of jobs created. Further, it is the quality and pay associated with jobs being created that makes us feel less sanguine since lower pay ultimately translates to lower disposable income and consumer spending. W hile the macroeconomic factors are less than favorable, positive dynamics among sector-specific factors cause us to hold on to our consumer related holdings for now. Select Consumer Industries and Retailing We believe our thesis for remaining invested in Select Consumer Industries, namely to benefit from a falling dollar and provide some defensive characteristics to the AlphaProfit Core Portfolio, continues to hold. The U. S. dollar has declined 14% vs. the Euro since the end of 2002 with 3% of the decline coming in November alone. Multinationals in this universe stand to benefit from a weakening dollar. Also, the valuation levels of companies in the consumer staples group are attractive and this sector has lagged the performance of the Wilshire 5000 during the equity market rally since March since many portfolio managers appear to be underweighting this sector. Should the equity market run into a downdraft mode, the defensive characteristics of this sector are likely to provide some cushion to the Core Portfolio. The sector-specific positives for retailing include factors like easy earnings comparisons on a yearover-year basis, more shopping days vs. last year, and strong fashion trends. Also, the high-end retailers such as Neiman Marcus and Saks Fifth Avenue are reporting positive surprises on the earnings front which we think is to a large extent driven by the stock market wealth effect. For the industry as a whole, same-store-sales comparison are ticking nicely with November metrics expected to be in the 4% range. Select Leisure and Multimedia Demand for products and services offered by companies in these funds are less dependent on consumer spending than Select Consumer Industries and Select Retailing. To some extent, the demand is driven by corporate spending in areas like travel and advertising. Our media holdings have been hurt by weakness in local advertising. Also, the FCC's approval of easing station ownership regulations is being challenged in Congress. A federal appeals court has granted a stay, barring the rules from taking effect and the hearings will begin next February. This makes opportunities for value creation through consolidation more difficult in this sector. Meanwhile, cable networks with their expansion of digital cable as well as programming content are making significant inroads into the world of network TV. Additionally, new technologies such as video-ondemand and voice over Internet provide revenue enhancing opportunities for cable operators. Viacom in our view is well positioned to benefit from its interests in cable networks. AlphaProfit Sector Portfolio Indicator Reading: Wait The U. S. economy is on a sustained path of recovery. The GDP growth figures for the third quarter were revised upward to 8.2%. The job market is also recovering with weekly initial claims for state benefits sustaining comfortably below the 400,000 mark at around 350,000. Profits at S&P 500 companies rose 21% in the third quarter and are forecast to climb 22% in the fourth quarter, according to Thomson Financial. Analysts expect earnings growth to surge by another 12.4% in Under normal circumstances, such robust performance and forecasts on the above mentioned metrics will cause Volume 1, Number 3 Page 5

6 us to be concerned with potential for rise in interest rates. Mitigating our concern is the lack of inflationary pressures particularly on the salary and wages front. The three-month hourly earnings trend is actually running at a record low 0.8% annualized rate. This makes us somewhat sanguine that a start of a secular trend of rising interest rates may not be imminent. The U. S, equity market as measured by the Wilshire 5000 is up 31.5% since the end of February From a technical perspective, the modest increase of 1.4% for the Wilshire 5000 in November has cooled things off a little bit from an over-extended position at the end of October. That said, the essentially uninterrupted rally in equity prices since March leaves the market vulnerable to a pull-back from investor's desires to lock in profits before year end as well as negative surprises on the economic and earnings landscape. A precipitous decline the U. S. dollar that makes U. S. securities unattractive for foreigners presents an added risk. The above factors in combination with the consideration that we will reposition our model portfolios at the end of the December, cause us to shift the AlphaProfit Sector Portfolio Indicator to a 'Wait' reading. Our model portfolios remain fully invested and the 'Wait' rating applies only to subscribers considering investment of additional capital. Volume 1, Number 3 Page 6

7 Fund Facts and News Fidelity Fund Ticker Fund Style Risk Rating Manager Distribution Consumer Ind. FSCPX Large Cap Blend Below Average C. Zahn None Leisure FDLSX Large Cap Growth Average J. Spencer None Multimedia FBMPX Large Cap Growth Average M. Friedman None Networking FNINX Large Cap Growth Above Average M. Cheyney None Retailing FSRPX Large Cap Blend Average A. Segal None Wireless FWRLX Mid Cap Growth Above Average B. Younger None Spartan 500 FSMKX Large Cap Blend Average Geode Capital None Manager Changes: A. Sacerdote departs as portfolio manager of Select Leisure and leaves the stewardship of this fund to J. Spencer. Fidelity Select Portfolio Fund's Initial Purchase Requirements: The minimum initial investment for regular as well as Traditional, Roth, and Rollover IRA accounts in any Fidelity Select Portfolio Mutual Fund is $2,500. The minimum initial investment is $500 for SEP-IRA and Keogh accounts. Check fund prospectus for details. Fidelity Spartan 500 Index Fund's Initial Purchase Requirements: The minimum initial investment for regular accounts in the Fidelity Spartan 500 Index Fund is $10,000. The minimum initial investment for Traditional, Roth, and Rollover IRA accounts is $2,500 and the minimum initial investment for SEP-IRA and Keogh accounts is $500. Check fund prospectus for details. Disclosure AlphaProfit Sector Investors Newsletter is for information purposes only. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. The newsletter does not have regard to the specific investment objectives, financial situation, and particular needs of any specific person who may receive this report. The products mentioned in the document may not be eligible for sale in some states or countries, and they may not be suitable for all types of investors. Before buying any mutual fund, read its prospectus carefully. The information contained in this newsletter is obtained from various sources believed to be accurate and is provided without warranties of any kind. Information is provided with the understanding that AlphaProfit Investments, LLC is not acting in a fiduciary capacity. Opinions expressed herein reflect the opinion of AlphaProfit Investments, LLC and are subject to change without notice. AlphaProfit Investments, LLC disclaims any liability for any direct or incidental loss incurred by applying any of the information in this publication. AlphaProfit Investments, LLC does not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such. AlphaProfit Investments, LLC is not responsible for any errors or omissions herein. The model portfolios presented in this newsletter are the product of AlphaProfit Investments, LLC. We calculate total returns based on price changes assuming reinvestment of all distributions in the funds in which they were paid. The 3% Fidelity Select Portfolio front-end load, taxes, and costs such as brokerage transaction fees are not factored in the results. On Sept. 23, 2003 Fidelity Investments eliminated the 3% front-end sales load on Fidelity Select Portfolio fund deposits. Investments in equity mutual funds such as those included in the model portfolios shown herein carry an inherent element of risk, including the potential for loss of the principal. Past performance is no guarantee of future results. The third-party trademarks or service marks appearing within this newsletter are the property of their respective owners. All other trademarks appearing herein are the property of AlphaProfit Investments, LLC. Fidelity Investments typically provides updates on top 10 holdings excluding money market instruments and/or futures contracts held by Fidelity mutual funds at the end of each quarter around the middle of the month following the end of the quarter. All of the funds holdings are not reported and the holdings may change at any time. Several of the companies discussed herein were held by the mutual funds in our model portfolio, per reporting date mentioned in this report. The mutual funds may or may not currently be invested in the companies mentioned in this report. Volume 1, Number 3 Page 7

8 AlphaProfit Model Portfolio Long-Term Performance The Core and Focus Portfolios were initiated on December 31, 1993 each with a $50,000 value. No new capital is added. All distributions are reinvested in the fund in which they are paid. The performance shown below is as of June 30, 2003; the returns do not include the one-time 3% front-end sales load charged by Fidelity Investments for deposits made in the Fidelity Select Portfolio funds. On Sept. 23, 2003, Fidelity Investments eliminated the one-time 3% front-end sales load for deposits in Fidelity Select Portfolio funds. Portfolio Value $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 $654,355 $383,312 $117,310 Dec-93 Jun-94 Dec-94 Jun-95 Dec-95 Jun-96 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Focus Core Wilshire 5000 Cumulative Return Compound Annual Return Sharpe Ratio 3 year 5 year Inception 3 year 5 year Inception 5 year Inception Focus 60.2% 347.8% % 17.0% 35.0% 31.1% Core 31.9% 176.2% 666.6% 9.7% 22.5% 23.9% Wilshire % -6.4% 134.6% -10.6% -1.3% 9.4% (0.23) 0.28 Total Return Total Return H03 Focus 13.0% 34.2% 10.4% 40.1% 82.1% 69.3% 29.9% 7.1% 10.0% 18.3% Core 3.9% 37.6% 16.7% 36.7% 44.0% 62.8% 21.4% 3.3% -1.4% 15.9% Wilshire % 36.4% 21.2% 31.3% 23.4% 23.6% -10.9% -11.0% -20.9% 12.9% Performance Relative to Wil Outperform Underperform 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% H03 Focus Portfolio - Wil Core Portfolio - Wil Volume 1, Number 3 Page 8

9 Alpha: Difference between the expected return of the sector fund and the "fair return" for the fund based on its historical responsiveness to market movements. Glossary of Terms Used States, as represented by the Standard & Poor's 500 Index (S&P 500 ), while keeping transaction costs and other expenses low. AlphaProfit Sector Portfolio Indicator : Proprietary short-term indicator used by AlphaProfit Investments, LLC to assess attractiveness and risks in investing additional capital. The indicator considers upcoming portfolio re-positioning exchanges along with economic and equity market metrics. AlphaProfit Core Portfolio: This portfolio generally comprises of 7 to 8 Fidelity Select Funds. When fewer number of Select Funds appear attractive, the portfolio invests in the Spartan 500 Index or Spartan Total Market Index funds. The portfolio is usually fully invested in equity funds. Portfolio turnover for the Core Portfolio is lower than that of the Focus Portfolio. Subscribers seeking long-term capital appreciation in retirement as well as regular accounts may find this portfolio suitable. AlphaProfit Focus Portfolio: This portfolio typically invests in 2 Fidelity Select Funds that are deemed most attractive. The portfolio is usually fully invested in equity funds. The typical holding period for the Select Funds included in this portfolio is 6 months. Portfolio turnover for the Focus Portfolio is higher than that of the Core Portfolio. Subscribers seeking aggressive growth of capital in retirement as well as regular accounts may find this portfolio suitable. Beta: Beta is a measure of the responsiveness of a security such as sector fund or stock to market movements. Compound Annual Return: The compound annual return rate earned by the portfolio over the referenced time period. Cumulative or Holding Period Return: Total return earned by the fund or portfolio over the referenced holding period. All distributions are reinvested in the fund paying the distribution. Fidelity Select Portfolio Funds: This refers to a group of 41 equity mutual funds that focus their investments on a particular sector or industry of the stock market. Fidelity Spartan 500 Index Fund: This mutual fund seeks investment results that correspond to the total return (i.e., the combination of capital changes and income) of common stocks publicly traded in the United Fidelity Spartan Total Market Index Fund: This mutual fund seeks to provide investment results that correspond to the total return of a broad range of United States stocks. The fund normally invests at least 80% of the fund's assets in common stocks included in the Wilshire Front-End Load: Mutual fund commission or sales fee that is charged at the time fund shares are purchased. On September 23, 2003, Fidelity Investments eliminated the 3% one-time front-end sales charge on deposits made into the Fidelity Select Portfolio Stock Funds. Fund Style: Fund style information obtained from Morningstar, Inc. at Risk Rating: AlphaProfit Investments, LLC classifies Fidelity Select Funds into 3 categories, 'Above Average', 'Average', and 'Below Average' based on the fund's standard deviation of returns over the last 8 years. Shorter history is used for newer funds. Sharpe Ratio: This ratio is commonly used as a measure of risk adjusted return. This ratio is calculated using the formula, (portfolio return minus risk free return)/standard deviation of portfolio return. The return on the Vanguard Prime Money Market Fund is used as a measure of risk free return. S&P 500 : This index consists of 500 stocks chosen by Standard and Poor s, Inc. It is a market-value weighted index (stock price times number of shares outstanding) that is widely used as a benchmark of U.S. equity performance. ValuM Investment Process: This is a proprietary investment process used by AlphaProfit Investments, LLC to select investments. The investment process selects sector funds for investing the model portfolio based on the sector s momentum, valuation, and news flow quality. Wilshire 5000 : This index measures the performance of all U.S. headquartered equity securities with readily available price data. Over 6,500 capitalization weighted security returns are used to adjust the index. Therefore, the index is an excellent approximation of dollar changes in the U.S. equity market. Volume 1, Number 3 Page 9