FOCAL POINT MANAGEMENT

Investment Advisory & Wealth Management Services Transformative Growth Leaders Update

So Far, So Good
A new strategy was implemented during the second quarter of 2016; while most of the
portfolio holdings have been in mutual funds and/or exchange traded funds,
incremental gain can be derived from carefully investing in individual stocks by using a
systematic, thematic approach and strategy, and cultivating these holdings for long term
returns as their underlying businesses and fundamentals blossom and take hold.

With this in mind, the strategy involves buying a focused basket of stocks (roughly 12-
15) which are comprised of companies which can generate superior long term growth
by dominating their markets, innovating and disrupting the industries they are in,
benefiting from shifts and trends in the consumer market and having expansion
opportunities ahead of them (i.e. by creating new markets, taking market share,
expanding via international growth, introducing new products and offerings and/or
generating disruptive new technologies). A strong consumer appeal is also an
important thread throughout these companies; all else being equal, a company that
imprints its logo in the minds of the public stands a better chance of surviving than one
that does not. A strong brand serves to attract, to habituate, to profit, and to protect.

Most of these companies are household names and in many ways are part of, and
indeed have changed, our daily lives. The objective is dominant long term growth with
the expectation these companies underlying growth will be faster and superior to that
of the overall economy and the specific markets they operate in. These companies in
some way have fashioned new products and innovative offerings, spawned new
industries and sparked change in consumer and business habits and practices; hence,
the Transformative Growth Leaders name.

With this in mind, stocks of roughly 14 companies have been purchased thus far:

Amazon
Apple
Costco Wholesale
Disney
Google (now listed as Alphabet)
Mastercard
Netflix
Nike
Panera Bread
Starbucks
Tesla Inc.
Under Armour
Visa
Whole Foods
In addition, several other holdings, Alibaba and Facebook, will be added if and when
they reach ideal purchasing valuations. Holdings are reviewed on a periodic basis and,
on occasion, some existing holdings may be sold and new holdings may be added as
new opportunities arise; turnover, however, is expected to be very low and relatively
insignificant over time. To manage risk, the Transformative Growth Leaders segment
of the portfolio has no more than a 10% overall allocation within an entire managed
protfolio.

Since implementation of this stock portfolio, this basket of stocks has gained 17.2% in
value, nicely ahead of the broader market, as evidenced by the S&P 500, which has
generated a 12.8% return over the same time period. A performance table is listed
below:

3/31/2017
Purchase Close Return%
Amazon $716.46 $886.54 23.7%
Apple $93.08 $143.66 54.3%
Costco Wholesale $146.71 $167.69 14.3%
Disney $97.80 $113.39 15.9%
Google $704.98 $847.80 20.3%
Mastercard $89.25 $112.47 26.0%
Netflix $90.84 $147.81 62.7%
Nike $57.44 $55.73 -3.0%
Panera Bread $200.29 $261.87 30.7%
Starbucks $55.92 $58.39 4.4%
Tesla Inc. $210.20 $278.30 32.4%
Under Armour $37.48 $19.78 -47.2%
Whole Foods $28.69 $29.72 3.6%
Visa $74.25 $88.87 19.7%

Gains have been paced by Neflix; 2017 is shaping up to be a critical period

for its business. Following several years of heavy investment spending, the streaming
video giant is finally beginning to cash in on its dominant global market position, and its
growth prospects continue to look strong. Netflix will pass 100 million subscribers this
year, up from 75 million users at the end of 2015, thanks to a big assist from
international markets. The bullish thesis rests on Netflix leading the charge in a global
shift away from broadcast television toward internet TV. And given its latest results, the
industry seems much closer to the beginning of this move than to the end. Subscriber
additions jumped to a 19 million user pace last year from 17 million in 2015. That
marked Netflix's fourth consecutive year of accelerating growth gains.

The company didn't have to sacrifice profitability to achieve those impressive results,
either. In fact, they occurred while Netflix raised prices in its core U.S. market and across
many of its biggest international geographies. Despite a few bumps along the way, TV
fans generally took the extra fees in stride, which suggests they're seeing plenty of value
in the increasingly exclusive package of content that Netflix is offering them.
With pricing power on its side, and with the international segment set to grow quickly
over the next decade while maturing toward the U.S. division's huge profit margin,
there's a clear path for Netflix to generate sharply higher earnings over the long term.

Another strong performer has been Tesla, which is on the brink of introducing self-
driving vehicles to the mass public. This is in addition to a decade of R&D around electric
vehicles. Years of manufacturing have allowed Tesla to demonstrate a proven track
record of electric vehicle performance, reliability, and safety, and have garnered high
customer satisfaction rates, which are at about as high a level as they can be. Consumer
Reports 2016 Annual Owner Satisfaction Survey ranked Tesla in the top spot, with 91%
of owners saying they would buy a Tesla again, given the chance. In the minds of its
customers, employees, and shareholders, Tesla isnt just another company; Tesla
engenders optimism, freedom, defiance, and a host of other emotions that other
companies cannot replicate.

Going forward, Tesla needs to execute its plan, which includes mass production of
500,000 of its mass market, $35,000 Model 3 by 2018, continued product line
extensions via light truck, mini-SUV and pick up truck introductions, and continued
evolution and roll out of its AI (artificial intelligence) driven autonomous car technology.

Finally, Panera Bread has been another strong performer in the portfolio. Panera has
found ways of improving its fast-casual dining recipe with technology, rolling out kiosks
that enable customers to avoid lines and order and pay for food digitally. It's also
introducing delivery service and ramping up a loyalty program that boasts 25 million
users. Such initiatives, combined with moves to make its menu healthier, helped boost
comparable-store sales at company-owned outlets by 4.2 percent in 2016.

Panera is one of the restaurant operators best equipped to accommodate evolving

consumer expectations regarding value, convenience, health, and technology. It has an
industry-leading loyalty program engagement (51% of transactions) and digital sales
penetration (24% of sales), expanding delivery capabilities, a growing at-home business,
and a potential refranchising/leveraged recapitalization play (just $630 million in debt
and franchisees own 55% of Panera's 2,000 locations). Perhaps recognizing this, Panera
received and agreed to be sold to JAB, a private German conglomerate for $7.5 billion.
The news was announced in early April and our portfolios saw a 58% total profit in the
Panera shares we own.

Looking forward, while many uncertainties exist in the economy and markets, the fact
remains that the U.S. economy is still expanding, inflation and interest rates remain low
and numerous companies are still growing their earnings. Even in this challenged
environment, really strong market leaders continue to grow and increase earnings.

Amin Khakiani
April 19, 2017