1. Kevin M. Wilson, PhD Chairman/CEO 1405 Medical Arts Building 324 W. Superior Street Duluth, MN 55802 Office: 218-464-4399 Toll Free: 877-327-5062 Fax: 218-464-4397 Email: info@bluewater-cap.com www.bluewatercapitaladvisors.com Bi-Monthly Market Review “How to Beat Inflation” (Proven Allocations That Work Against Inflation) July 17 th, 2014 1 Ted A. Pavlovich, WMS President/Wealth Mgmt. Advisor 1

2. INTRODUCTION TED A. PAVLOVICH 2 (-82%)

3. RECENT ECONOMIC DATA SUGGEST INFLATION’S ON THE WAY KEVIN M. WILSON 3

4. 4 Cost-Push Inflation With Wages Leading in 1970’s 1 2 3 4

5. 5 Commodity and Land Prices Rising

6. 6 Add Heathcare and Other Factors And You Get Higher Inflation

7. 7 Middle Class Getting Squeezed $4326 (3x)

8. 8 Wage Pressures Rising

9. 9 Fed Has Created Dangerous Situation That Will Be Hard To Manage

10. JUDGING THE RISK POSED BY INFLATION TED A. PAVLOVICH 10

11. 11 High Inflation Causes Big Problems For The Economy 1 2 3 4

12. 12 Example: Bonds Lose Value

13. 13 Example: Stocks Don’t Do Very Well

14. 14 Even Diversified Moderate Portfolios Under-Performed Under High Inflation

15. THREE FACTORS IN INFLATION HEDGING TED A. PAVLOVICH 15

16. 16 The 1970’s Demonstrated The Limits of A Standard Portfolio Approach

17. 17 Factor 1: Sensitivity of Inflation Hedges

18. 18 Factor 2: Reliability of Inflation Hedges

19. 19 Factor 3: Volatility of Inflation Hedges

20. MIXING REAL ASSETS TO COMBAT INFLATION KEVIN M. WILSON 20

21. 21 Diversification Has Variable Utility As Circumstances Change bonds all stocks

22. 22 How Much Equity To Allocate Depends on the Inflation Rate (If Indexing)

23. 23 A Wide Array of Assets Should Be Used In Combination, Depending on Rates

24. 24 Sector Allocations Are Critical To Hedging Against Inflation Oil vs. Money Supply

25. 25 Real Assets Like Land, Real Estate and Timber Are Also Effective Hedges houses stocks

26. 26 Gold and Other Real Assets Have Complex Utility As Hedges

27. 27 Hedging Involves a Time Factor (Must Have Active Mgmt.)

28. 28 Allocation Weights Change As Inflation Rate Increases

29. SUMMARY 29 KEVIN M. WILSON 1)Inflation may be on the way 2)Risks to investors are high 3)Inflation risk can be hedged 4)Asset allocations will need to vary with inflation intensity

30. Q & A 30 KEVIN M. WILSON TED A. PAVLOVICH

31. This report is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any security or commodity and is not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Any opinions expressed herein are subject to change at any time without notice. Information has been obtained from sources believed to be reliable, for its accuracy and interpretation are not guaranteed. Investing in securities involves risk, including possible loss of principal. Past performance should not be taken as an indication of guarantee of future performance and no representation, express or implied, is made regarding future performance. The firm does not provide tax advice; clients should contact their attorney, accountant, or other tax adviser regarding tax matters. “BWCA is a state registered investment adviser in all states in which it is required to be registered. All Blue Water Capital Advisors’ customer assets are held in the customer name with Fidelity Institutional Services, clearing through National Financial Services (NFS), Member SIPC, a Fidelity Investments Company as Qualified Custodian.” Disclaimer 31