In keeping with your personal portfolio outline, we make individual security selections using the following guidelines:

Equity Investments

• We research potential equity investments using our proprietary analytical models. Our equity research is designed to identify both small- and large-capitalization companies that consistently deliver above-average returns to shareholders, that favor a conservative capital structure, and that generate cash flow internally to fund growth. Longer Financial utilizes an analytical model to provide information on certain equity securities that we have selected as potential investments for clients. Rather than researching the entire universe of equity investments, only those investments that meet Longer Financial’s preliminary criteria are reviewed using this model. The information gathered through this analytical approach is used as part of the firm’s overall analysis in determining which equity investments should be selected for a given portfolio.
• Once attractive growth stocks have been selected, we subject them to several in-house valuation models to determine fair valuation, given their intrinsic characteristics. By carefully assessing each company’s historical trading patterns and valuations, relative both to the market and to the industry, we determine which stocks represent attractive investment opportunities.

Fixed-Income Investments

• The primary challenges bond investors face are credit risk, inflation risk, and reinvestment risk. The fixed-income portfolios we manage are structured to address those risks, to maximize income, and to maintain flexibility for reinvestment opportunities.
• For taxable accounts, we closely monitor comparative yield curves in the municipal and taxable bond markets. Our goal is to maximize aftertax income, given your unique state and federal tax circumstances.

Other Investments

From time to time, Longer Financial uses carefully chosen no-load mutual funds and Exchange-Traded Funds (ETFs) to diversify client portfolios into areas that require specialized knowledge. For example, such funds can be a way to participate in foreign markets, real estate investment trusts (REITs), utilities, and other areas for diversification purposes.

Additional disclosures

Longer Financial utilizes an analytical model to provide information on certain equity investments that we have selected as potential equity investments for clients. Rather than researching the entire universe of equity investments, only those investments that meet Longer Financial’s preliminary criteria are reviewed using this model. The information gathered through this analytical approach is used as part of the firm’s overall analysis in determining which equity investments should be selected for a given portfolio. Limitations exist with any research method. No analytical model should be an investor’s sole source of information. We feel this proprietary research method sets a solid framework from which we can work.