HARRINGTONCAPITAL MANAGEMENT

International Markets are where the growth is:

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Spring 2012

We have all made mistakes, myself included. To me, this is part of the learning and growing process. I have looked at the details of the proposed jobs bill and I see plenty of audacity and zero hope. The bill wants small businesses to hire people, take away their itemized deductions and raise wages while simultaneously raising taxes on the business itself. Sound good? It is nonsense and it is more politics not economics.

Our administration is reading the wrong books once again and I see America on the path to Greece. This job policy is bungled policy and will hijack our stock, real estate and bond markets even further into the abyss. In fact, before this bill was talked about the small business indices fell to their lowest levels since 2010. Why you ask? Because of too much government requirements, intervention, red tape and taxes and now all of these policies are coming to a head! We are on the fast track to QE3 when what we really need is stability and breathing room.This market will continue with periodic panics and extreme market volatility. This is all the more reason to hire us to help you protect, preserve and transfer your hard earned dollars. HCM will remain focused on fundamentals, attractive valuations and pertinent themes.

Over the next few months, we think the markets will be buoyed by the Federal Reserve and the ECB, as they move forward with policies that keep rates low – which in turn will compel investors to put money into the stock market in their quest for return. Our current administration has it wrong but the FED will make us invest in the equity markets given interest rates remaining so low. HCM will overweight in technology and healthcare and continue to focus on dividend yield. We will do this through mutual funds, unit investment trusts, ETF’s and individual stocks. We will invest at the intersection of value and growth and create alpha for our clients. We will look not just domestically but internationally as well.

I've found more than 200 "other" companies paying 12%-plus yields... and thousands more paying above 6%.

But most U.S. investors have no idea that these securities even exist!

Meanwhile, many of the world's wealthiest investors -- including Warren Bu�ett -- have been quietly cashing in on them for decades.

• Interest rates are near zero. Savings accounts pay next to nothing. 10-Year Treasuries pay under 2%.• And the average yield for all stocks in the S&P 500 is just 2.0%.Now, I'm not trying to ruin the mood by bringing this up. In fact, you can still �nd plenty of great yields here in the United States. But for years I've been watching what amounts to a silent revolution in income investing.

That's because the vast majority of the world's highest yields aren't being paid out by U.S.companies...

Expand your horizon a bit, and it's a completely di�erent story. That's what the investors I just told you about have �gured out.

Right now, 210 additional companies are yielding more than 12%They just aren't based in the U.S.

17 here versus 210 abroad -- where do you think the best hunting ground is for investors who are truly serious about high yields?

In June 2011, Money Magazine con�rmed what I've been trying to tell investors for years:

"Your quest for dividend payers can no longer stop at our shores. These days, some of the heftiest payouts and fastest dividend growth are being delivered by companies abroad."

Money Magazine, June 8, 2011

The simple fact is that when you start looking abroad, high yielders are practically a dime a dozen. I've told you a couple of times now that the S&P 500 pays an average yield of 2.0%. That makes us one of the lowest-yielding markets in the world.

As Judy Sarayan, a fund manager at mega-investment firm Eaton Vance explained, "There's a much stronger dividend culture abroad... Individual investors play a larger role in those markets, and they have always demanded more dividends."

That di�erence is pretty dramatic when you start looking at some individual examples of higher yields abroad. Take banks, for instance. Here at home, Bank of America (NYSE: BAC) used to pay investors $2.56 per share before the financial crisis. That represented a yield of more than 6%.

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But compare that to what I'm seeing in international markets. Germany's average yield is 3.6%... Brazil's average yield is 3.6%... the United Kingdom yields the same... Australia yields 4.7%... New Zealand pays 4.8%.

Take a look: And remember, those are just the averages, weighed down by large numbers of stocks that don't yield a cent.

Of course, we all know what happened next. Today, BAC pays a laughable $0.01 (yes, one penny) each quarter. But it's a completely different story outside the United States.

Santiago, Chile-based Corpbanca SA (NYSE: BCA) is a perfect example. Chile's largest bank, Corpbanca o�ers commercial and retail banking through more than 100 o�ces. The bank also o�ers mutual fund management, insurance, and securities brokerages through a network of subsidiaries. Not only have the shares soared over the past five years, but dividends now total $1.66 per share each year. That gives the stock a yield of over 7.0% at recent prices.

International markets are where the growth is!

The United States is unlike any other nation on the planet. It's the largest economy. It's home to the world's most innovative entrepreneurs do not get me wrong but for a portion of one’s portfolio international markets make sense. With an economy in excess of $14 trillion, growing more than a few percent each year is a major undertaking.

In fact, think back about what we've seen over the past few years. The U.S. government has spent trillions in an e�ort to stimulate the economy. The Federal Reserve has spent trillions more. Interest rates have been slashed to zero. And yet, the U.S. economy grew a meager 2.8% in 2011. Not bad, but nowhere near the top of the list when it comes to GDP growth.

Qatar topped this list with 17.0% growth. Panama saw a 7.4% rise in GDP... South Korea, 4.5%... Poland, 3.8%... even Chile boosted its GDP at a 5.9% annual rate. But to me, GDP numbers alone don't tell the entire story. I much prefer to know what companies and their CEOs are actually seeing. To investors like you and me, that's the real story. For example, in a recent quarter Apple (NYSE: AAPL) saw sales in North America soar 63% year-over-year... but abroad, sales were up 95%.

It's the same for credit card giant MasterCard (NYSE: MA). They saw the amount charged on their cards rise 9.9% in the United States, but 19.9% abroad. Even McDonald's (NYSE: MCD) saw sales up more than 12% in its international markets during a recent quarter versus less than 3% growth here at home. Just imagine what companies focused solely on international markets are doing...Take AmBev (NYSE: ABV) for instance. This company's business couldn't be simpler -- it distributes beer and soda in Brazil and throughout South America. It's actually the fourth-largest beer producer in the world.

Over the past five years, sales have grown 96% and profits have risen 284%. That's led to a surge in the share price. In just five years AmBev's shares have gained more than 255%. And with dividends included, your total return is more than 325%. Compare that to the S&P 500's gain of just 3.4% (dividends included) during that same period.

Meanwhile, some of America's greatest CEOs are simply glowing about expanding into faster-growing international markets. Take what Howard Shultz, CEO of Starbucks (Nasdaq: SBUX), had to say about his company's growth prospects in China...

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"I think perhaps the most encouraging aspect of our Chinese business to date is the response that we're getting in secondary and tertiary markets in cities that most Americans have never heard of with populations ranging from 1 million to 6 million or 7 million people.

So when we look at the number of cities in China that are going to have 1 million people or more and the government o�cials are telling us it's going to be over 100 cities, the opportunity I think we have is very significant."

And then there's Warren Bu�ett, the world's most famous investor, giving his thoughts on India...

"The market is growing, getting more prosperous by the day, where businesses are �ourishing. This is a dream market in a sense. The number of people, the buying power that they are gaining, the ability to produce things, everything is getting better every day."

That's not mincing words. But what does this rosy outlook from some of America's greatest CEO's actually mean for individual investors? It means U.S. investors have a great opportunity to capture big gains by investing in foreign stocks. So it shouldn't surprise you that in 2011, the S&P 500 returned about 2% (that's with dividends included!). When you look at the total performance worldwide, the U.S. market ranked just 13th in the world over that period. In other words, there were a dozen other places to make more money.

But that's just one year. The di�erence is more pronounced over the long term.

During the past five years ended 2011, the S&P 500 has returned -1.2%.But 44 other countries delivered better stock market returns. According to Bloomberg, countries like Chile, Germany, and even Mexico have handily outperformed the U.S. market. The opportunities abroad have become so profound that even New York City is looking to invest more overseas to grow its city pension...

"Calling the rising cost of city pensions "unsustainable," Deputy Mayor Robert K. Steel said Thursday that New York City should move swiftly to overhaul its benefit system, including by investing more funds in overseas markets.

Mr. Steel, who oversees economic development for Mayor Michael R. Bloomberg, said moving retiree investments out of American stock markets and into international equities could bring higher returns, helping alleviate some pressure on the city's budget."

-- The New York Times (Blog), July 14, 2011

So with all that in mind, how can you start boosting both your growth AND your dividend income by investing in international companies? Before I go any further, I want to clear up one common misconception. Buying high-yield international stocks isn't di�cult. You don't have to change currencies... you don't have to open a new brokerage account. You don't have to even leave the New York Stock Exchange.

In fact, thousands of these companies currently trade right here in the United States.

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Let me give you an example: I'm a big fan of Ship Finance International (NYSE: SFL). This Bermuda-based company leases more than 60 cargo ships and drilling rigs to users all over the world. Included in its fleet are nearly 30 crude-oil tankers. To me, Ship Finance is a no-brainer. The world is increasingly hungry for more resources -- oil, grain, iron ore, and countless other commodities and goods. And the primary way of moving those goods is over the open ocean. That means the company should always see demand for its ships for years to come. At the same time, it's not easy for another competitor to come in and take away business. After all, it takes millions of dollars and years of labor to build a new ship.

Best of all, SFL is paid handsomely for leasing its ships and rigs (up to $75,000 per day in some cases)... and it passes the majority of that money to its investors. Right now the company pays a dividend of $1.56 a share each year. That gives the stock a yield of more than 12.0%. Buying shares of Ship Finance is a piece of cake... it trades as an American Depositary Receipt (ADR) on the New York Stock Exchange. That means the shares trade right here in the U.S. just like any other stock. You can buy them just as easily as you would a share of Walmart (NYSE: WMT) or General Electric(NYSE: GE).

According to Bloomberg, 1,726 international stocks currently trade in the United States. That includes some of the world's largest companies -- like PetroChina (NYSE: PTR) and Vodafone (NYSE: VOD).

Now, not all of those are high yielders. But in that list are hundreds for investors to choose from. Names like France Telecom (NYSE: FTE), which pays more than 12%... and German energy giant E.ON AG (OTC: EONGY), which also pays a double-digit yield. But what about all those high yielders you can't buy here in the United States? Are they simply untouchable? Think again.

The rise of international markets hasn't been lost on investors -- more importantly, it hasn't been lost on the companies that create investment funds. Over the past few years dozens of funds that focus on international dividend payers have come to market. These funds scour the globe in search of the highest yields. They then combine them all into a nice neat package for U.S. investors to buy.

Let me give you an example: Most investors have never heard of the AllianceBernstein Global High Income Fund (NYSE: AWF).

This fund is exactly the sort of find I'm talking about... it invests in hundreds of bonds around the world. Many of these securities are difficult -- if not impossible -- for average investors to buy. But AWF gives you an opportunity to buy a basket of them without leaving the United States.

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The fund owns government bonds from Brazil that pay 12.5% annually. It owns bonds from Russia's Gazprom -- the world's largest natural gas explorer -- that pay 9.25%. But not all of its holdings are from abroad. It also balances out that exposure with bonds from American companies -- like Caesars Entertainment notes paying 11.25%. But focusing heavily on overseas bonds -- where yields are higher -- allows AWF to throw off a spectacular stream of income. This diversified fund pays $0.10 per share every month, giving it a yield of 8.0% at recent prices.

I think by now you're starting to see the appeal of international income stocks. But what about the safety of international investments? With all the turmoil we're seeing around the world, isn't it risky to invest abroad?

The 18 Countries As Safe -- OR SAFER -- InvestmentsThan the United States

I've talked to plenty of investors over the past several years. And I've noticed that when you bring up investing in international companies, there are tons of misconceptions. First and foremost -- many investors see other countries as somehow being "riskier" than the United States. For me, it's the exact opposite... I see them as safe havens.

I don't know about you, but I have a lot tied to the economic well-being of the United States. My business is based here. I own property here. And you better believe I own stocks in this country. When you think in those terms, it's easy to see just how closely your future is tied the future of the U.S. But there are some grim realities we need to face. America's total debt load already tops $15 trillion --and it's projected to reach $22 trillion by 2020.

The current debt is more than $135,000 for every taxpayer in the United States. Like a taxi meter spinning faster and faster, we are slipping $4.2 billion deeper into the hole every day -- at a rate of $175 million per hour. Our credit rating was even knocked down from its golden "AAA" status by Standard & Poor's.

At this point, if you aren't diversifying your investments outside the United StatesThen I think you're taking far too much risk.

Don't get me wrong -- despite the issues we face in the U.S., I'd still take it over any other nation on the planet. I love this country. But that doesn't mean I want every dollar I invest to stay here at home. And the truth is, if you focus only on U.S. companies, then you're missing out on thousands of great international businesses.

For example, of the ten largest companies by revenue on the planet, only three are in the United States. U.S.-based Walmart (NYSE: WMT) takes the cake for the world's largest public company by revenues... but foreign companies like Royal Dutch Shell, Total S.A., and Japan Post Holdings round out the top 10. And only four of the world's ten largest pharmaceutical companies are based in the U.S. Most of the largest companies -- like Roche, Novartis, and Bayer -- are all based internationally.

On top of that, countries like Australia are seeing unemployment rates of just 5.2%... Brazil is at 4.7%... Germany 5.5%... South Korea's unemployment rate is just 3.1%. No, not every country is a safe haven. Put your money in a risky play like Greece... or Italy... or any number of countries with major debt problems, and don't be surprised if even the safe dividend payers let you down.

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But it's not the same everywhere... Currently, a total of 18 countries and territories have credit ratings as high -- or higher -- than the "AA+" rating of the United States. This list of safe havens includes nations like Australia, Norway, Singapore, and Switzerland.

And its easy to see why. According to the CIA World Factbook, Norway's public debt-to-GDP ratio is just 48%. Switzerland's is just 52%. And Australia's is 30%. That's not to say none of the countries have large debts, but for the most part, they are in better shape than the United States. According to Reuters, Norway is even projected to run a $59 billion budget surplus this year! When you realize that, why would you beat yourself up fighting the frustrating economic climate here at home?

And the best news is that there is an added bonus to investing in economies stronger than our own. As I'll show you, that bonus can mean a double-digit boost to your income...

How to Boost Your Income Stream by 10%-Plus... in a Single Year

I've talked a lot about the advantages of adding international high-yield stocks to your portfolio. But what I haven't mentioned may be one of the best reasons to invest abroad. You've no doubt seen the headlines. The almighty dollar is weakening. It has been for years.

But guess what? That's a positive -- IF you're investing in international dividend payers. In fact, in some cases you could have seen a 10% boost in your income, even without a dividend increase.

In simple terms, here's how it works: Say five years ago you took the trip of a lifetime to Australia. Back then, $1.00 U.S. bought you roughly $1.30 Australian. That means a hotel room priced at $100 Australian dollars only cost about $77 U.S. dollars thanks to a favorable exchange rate.

But today, the U.S. dollar has plummeted. It now trades for less than the Aussie dollar. That $100 room in Aussie dollars will now cost you $108 U.S. dollars -- a 39% increase, even though the hotel's rate didn't change. What does this have to do with dividends? Well, what's bad news for your vacation is great news for your international income investments.

Say you bought an Australian company five years ago that paid a dividend of 10 Australian dollars each year. Back then, you would have earned $7.70 in U.S. dollars after conversion. But today, that same 10 Aussie dollar dividend would be worth $10.80 in the U.S. as well... or 39% more.

The bottom line is if the U.S. dollar continues to weaken versus other major foreign currencies, then your dividends will increase over time... even if the company you invest in keeps its dividend payment the same. The best news is that I see this trend continuing for at least the next two or three years. And I'm not the only one who thinks this:

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Recognizing this trend years ago -- and investing alongside it -- has already given international income investors a major boost.

Now keep in mind, if the dollar were to rally, the opposite would happen. But for a variety of reasons I won't bore you with today, I think the U.S. dollar will continue to lose value in the coming years.

“We expect to end the year lower from where the market is now.” We will act as your GPS and help you navigate thru this turmoil. Also, count on us to read the fine print!

Until next time,

• "If you ask me if the U.S. dollar is going to hold its purchasing power fully at the level of 2011, five years, ten years or twenty years from now, I would tell you it will not."

Warren Bu�ett, March 25, 2011

• "America is also pursuing a policy of currency weakening"

Alan Greenspan, November 10, 2010

• "Don't Like a Weak Dollar? Might As Well Get Used to It"

CNBC.com, April 21, 2011

Sincerely,

Kyle Harrington, Founder and Managing Partner