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Ascendere Associates LLC Innovative Long/Short Equity Research

Model Portfolio Daily Update: December 20, 2010


This daily update is a supplement to a monthly report dated November 30, 2010 that details the model portfolio strategies of Ascendere Associates LLC ("Ascendere"). For more
information, please see our list of frequently asked questions, suggested tips on using our newsletter or an interview with us on Covestor Live. See also our long-only model
based on actual trade data. Please see our disclosures and disclaimers at the back of this report.

New Actions Required:


None.

Of Note:
CSX Corp. (CSX) was added to the Bank of America/Merrill Lynch US-1 List today. This is the 12th major positive sell side action that has occurred for the month to date with
stocks in our model portfolios what we are aware of.

Are we at the beginning of a Silver Lining Rally? Unfortunately with 8 trading days left in the month we now find ourselves lagging the S&P 500 by 97 basis points (assuming no
costs) in our theoretical Core and Opportunistic Long Model portfolios. Even our larger, 57-stock, fundamental-only Naive Long Model Portfolio is lagging the S&P. Something is
going on here -- the market is not rewarding holders of "high-quality" stocks this month. Of the 1,176 stocks that traded on major U.S. exchanges and had a market cap greater
than $2.5b as of the November 30, 526 of them have surged higher than the S&P 500 simple MTD return of 5.52%, with the top 20 averaging returns of 28.35%. This smells like
a junk rally in the works.

According to the table below, stocks that have are beating the S&P 500 for the month-to-date have average low scores (but not abysmal scores) for the key factors we track
(Relative Value, Operating Momentum, Analyst Revision Momentum and Fundamental Quality), and have high average volatility and high average beta. Interestingly, 6 of the
top 20 best MTD return stocks received at least one score of 5 in a category, 13 out of 20 received at least a score of 4 or better, and 15 out of 20 received a score of 3 or better.

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This could indicate the market sees a silver lining in all of these stocks; that is, if a stock is ranked highly in one area, the market may be betting that the rest of the stocks relative
fundamentals have a chance of improving as well.

The last time our models lagged a surging market was in March and April of 2009, and as we explained last week, it is our opinion that 2011 will see continued earnings growth
and multiple expansion. This "Silver Lining Rally" anecdotally provides further cause to be optimistic about market performance in 2011. So what do to with this information?

In our opinion, modifying our "high-quality-only" model strategies to chase returns in the hope of beating the S&P 500 for December can easily backfire. It is not clear to us yet
that buying stocks with mediocre average scores with a positive outlier score is the best thing to do, especially only with eight trading days left in the month. In any case, we are
confident that an approach that focuses on consistently holding the highest quality stocks as defined by the four key factors that we measure can generate superior returns on
average over time. As it concerns our existing strategies, we may allow ourselves to replace a high-quality stock under year-end selling pressure such as United Continental
Holdings, Inc. (UAL), but the risk of that is to lose any upside as investors start anticipating the end of tax loss selling. While we generally stay consistent in our approach in
owning only the highest-quality companies as we define them, we allow ourselves the occasional exception when putting theoretical models into real world use. Staying
consistent for consistencies sake can backfire as well.

For aggressive traders beholden to no one but their own P&L, there does seem to be an opportunity here. Perhaps seeking out "Silver Lining" stocks that that look attractive on
some key factors, but not all, might be highly rewarding in the short term. If any piece of this analysis is accurate, perhaps there may be opportunity with a few "Silver Lining"
stocks that have risen roughly in line with the market so far for the MTD, with the most intriguing idea being Ford Motor Company (F). Interestingly, as we have mentioned in
our previous weekly reports, Ford shares a few characteristics with Netflix, Inc. (NFLX), Apple Inc. (AAPL) and Chipotle Mexican Grill, Inc. (CMG) from earlier in the year. Like
Ford, all of these stocks scored a 5 for every category except for relative valuation just prior to moving on to incredible upward moves.

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.

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Top 20 Returning Stocks with Market Caps Above $2.5b for the MTD

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Bottom 10 Stocks In Line or Beating the S&P 500 MTD

Source: Capital IQ data, Ascendere Associates data and estimates.

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Actions Taken for November to Date:
12/20/2010: A short position in Harley-Davidson (HOG) was assumed closed at $34.38 for a 9.91% loss after closing above its stop price of $34.34 the previous trading day.

12/15/2010: A long position in Avery Dennison (AVY) was assumed closed at $41.73 for a 11.16% gain after closing above its price target of $41.52 the previous trading day.

12/14/2010: A short position in KB Financial Group (KB) was assumed closed at $51.59 for a 12.05% loss after closing above its stop target of $50.56 the day before.

12/10/2010: A short position in Alliance Data Systems Corporation (ADS) was assumed closed at $69.84 for a 10.72% loss after closing above its stop price of $68.54 the day
before.

12/6/2010: A short position in CGG Veritas, or Compagnie Générale de Géophysique-Veritas, (CGV) was assumed closed at $27.41 after closing above its stop price of $26.89
the previous trading day for a loss of 17.89%.

12/3/2010: The overall return in the Opportunistic Model Short Portfolio hit its stop target today and is now assumed closed with a 6.16% MTD return.

11/30/2010: Model portfolios were rebalanced following the 11/30/2010 close.

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Nostradamus Activity -- Core and Opportunistic Model Portfolios:
We have noted on numerous occasions that it is not uncommon for stocks that appear in our model portfolios or our weekly ranking updates to presage major ratings actions by
sell side firms. See our "Nostradamus Report" and "Getting in Before Sell Side Institutions Follow" for more details. Below is a non-comprehensive list of sell side actions on
stocks that have been in our model portfolios since at least 11/30/2010:

12/20/2010 -- CSX Corp. (CSX) -- Bank of America/Merrill Lynch added the stock to its US-1 List.

12/15/2010 -- T. Rowe Price Group (TROW) -- Goldman Sachs added the stock to its Conviction Buy List, raised its rating to Buy from Neutral, and raised its stock price target to
$80.

12/15/2010 -- Freeport McMoRan (FCX) -- Argus raised its target price to $139 from $113 while maintaining a Buy rating.

12/15/2010 -- Parker-Hannifin's (PH) -- Argus raised its price target to $100 from $86.

12/14/2010 -- TRW Automotive (TRW) -- KeyBanc upgraded the stock to Buy from Hold with a $69 price target.

12/9/2010 -- United Continental Holdings (UAL) -- Morgan Stanley named the stock a long Research Tactical Idea.

12/9/2010 -- Freeport McMoRan (FCX) -- Credit Suisse raised its price target to $130 from $110, making it the highest price target on the Street. In our opinion, that 12-month
target is easily attainable.

12/9/2010 -- Waddell & Reed (WDR) -- Barclays upgraded the stock to Overweight from Equal Weight, and raised its price target to $41 from $30.

12/7/2010 -- Fossil, Inc. (FOSL) -- J.P. Morgan raised its price target to $77 from $68 while maintaining a neutral rating.

12/6/2010 -- Lyondellbasell (LYB) -- Jefferies raised its price target to $36 from $33 while maintaining a buy rating.

12/3/2010 -- RPC, Inc. (RES) -- Canaccord Genuity raised its price target to $37 from $30

12/2/2010 -- Ares Capital Corporation (ARCC)-- UBS initiated with a buy rating and $18 price target.

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Nostradamus Activity -- Ascendere Weekly Ranking Update
Below is a non-comprehensive list of sell side actions on stocks that have made it into the Ascendere Weekly Ranking Update report 11/30/2010:

12/18/2010 -- Illinois Tool Works Inc. (ITW) -- Barron's featured the company less than a week after we noted the stock as a new "high-quality" stock idea in the 12/10/2010
issue.

12/16/2010 -- Starbucks Corp. (SBUX) -- Goldman Sachs added the stock to its Conviction Buy List with a target price of $44. Citigroup initiated coverage of the stock with a Buy
rating and $40 target. SBUX has been listed in the Ascendere Weekly Ranking Update since November 12.

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* This table represents a theoretical model, and is presented for informational purposes only. This table is not representative of any actual portfolio and is not to be
construed as any advertisement of any investment service. The figures above are gross returns of various models and do not assume any kind of cost. Real portfolios that
attempt to replicate these theoretical strategies are practically guaranteed to generate returns significantly lower returns relative to these models.

The "Naive" Model is so named because it excludes risk management and other refinements and is intended to show the returns due to fundamental factors alone, which
include operating momentum, relative value, fundamental quality and analyst revision momentum. Typically the Naive Model comprises of approximately 80-100 stocks.

The Core Model is a refined version of the Naive Model and uses stock-specific price targets and stops. Over the backtest, the number of stocks in the Core Model has
comprised on average approximately 22 stocks in the long portfolio and 15 stocks in the short portfolio.

The Opportunistic Model uses the same stocks and stock-specific price targets and stops of the Core Model, but it additionally applies target and stop loss rules to the long and
short portfolios. This model is usually dollar neutral, but when target or stops are reached this model could change to 100% long or short or to 100% cash at any given time.

Return of Stocks in the Long Portfolio - Return of Stocks in the Short Portfolio = Return of Overall Portfolio. Cumulative and YTD returns are based in part on backtested returns
and returns collected in real time. Cumulative returns include a backtest to 12/31/2004. Returns of the Naive Model have been tracked in real time since December 31, 2009.
Returns of the Core Model has been tracked in real time since July 31, 2010. Returns of the Opportunistic Model have been tracked in real time since August 31, 2010.
Cumulative returns and the Sharpe Ratios are calculated from the 12/31/2004 "inception." The risk free rate used in the calculation is the 90-day T-bill, which has averaged
~2.33% since 12/31/2004. None of these models assume any kind of expenses.

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Most of the time, our models assume investors are long "high-quality" stocks and short "low-quality" stocks. Therefore, we would prefer to see "high-quality"
stocks moving up for the day and "low-quality" stocks moving down.

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Daily Returns
The latest daily returns, and backtested daily returns, of all stocks and model portfolio strategies are available to paying subscribers on request.

The stock picking methodology among our Core and Opportunistic Models are the same.

Our Opportunistic Model differs from our Core Model in that it incorporates portfolio-based risk-management strategies, which are continually under
refinement.

Our portfolio targets and stops are available to paying subscribers.

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Month to Date Returns

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DISCLOSURES
Ascendere is in the business of providing equity research and related consulting services to investors and their advisors. The equity research it provides includes
basic quantitative model portfolios and more detailed fundamental research with respect to individual stocks. In addition, the firm manages stock portfolios for
itself and clients. Ascendere currently sources financial data from Capital IQ.

Ascendere does not rate stocks on any scale, but does offer individual stock commentary and valuation opinions. With regard to Ascendere's portfolio
strategies, "long" or "high-quality" baskets should generally be considered buys, unless otherwise noted. Stocks in our "short" or "low-quality" baskets should
generally be considered sells, unless otherwise noted. While exceptions may occasionally occur, typically stocks in the high-quality basket are expected to
outperform the S&P 500 over a month's time and stocks in the low-quality basket are expected to underperform. A more relevant benchmark would comprise
of all stocks and ADRs that trade on major U.S. stock exchanges with a market cap above $2 billion.

Ascendere adheres to professional standards and abides by codes of ethics that put the interests of clients ahead of its own. The following are specific
disclosures made by Ascendere:

1) Ascendere may have a financial interest in the companies referred to in this report ("the Companies"). The research analyst covering the Companies
and members of the analyst's immediate family have a financial interest in one or more of the Companies.

2) Ascendere generates revenue from research subscription revenue and portfolio management fees. At any given time it may be long or short any of
the Companies.

3) Ascendere does not make a market in the securities of any of the Companies.

4) Ascendere has not received compensation from the Companies.

5) Ascendere has not managed or co-managed a public offering for any of the Companies.

6) Neither Ascendere nor any of its officers or any family member of the covering analyst serve as an officer, director or advisory board member of any
of the Companies.

7) Neither Ascendere nor any of its officers or any family member of the covering analyst beneficially own 1% or more of any class of securities of any of
the Companies.

8) The covering analyst certifies that this report accurately reflects such analyst's personal views.

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DISCLAIMERS
This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial
instruments. The report is not intended to be in furtherance of the specific investment objectives, financial situation, or particular needs of any individual
recipient. The information contained herein accurately reflects the opinion of Ascendere at the time the report was released. The opinions of Ascendere are
subject to change at any time without notice and without obligation or notification. The officers, affiliates or family members of Ascendere Associates may hold
positions in the securities of the Companies. No warranty is made as to the accuracy of the information contained herein. This information is intended for the
sole use of clients of Ascendere. Any other use, distribution or reproduction is strictly prohibited. Investing in stocks includes a high degree of risk, including the
risk of total loss. For additional information on risks, disclosures, disclaimers and frequently asked questions, please see the back of any monthly report.

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