4 B A R RON ’ S March 24, 2014

Invesco ConvertibleSecurities Fund(CNSAX)

Income Opportunities Across Asset Classes

Convertibles Category(74 funds)

Inception: 7/28/97Hybrid

Invesco SeniorLoan Fund(VSLAX)

Bank Loan Category(147 funds)

Inception: 2/18/05Alternatives

Invesco High YieldMunicipal Fund(ACTHX)

High Yield Muni Category(153 funds)

Inception: 1/2/86

FixedIncome

To learn more about Invesco’s income products, visit invesco.com/IncomeStars or contactyour financial advisor or Invesco representative today.

AGE OF INCOME

INTENTIONAL INVESTING®

Overall Morningstar Rating™ based on risk-adjusted returns as of Dec. 31, 2013, and derived from a weightedaverage of the performance figures associated with its 3-, 5- and 10-year rating metrics. Past performance does

not guarantee future results.

Before investing, investors should carefully read the prospectus and/or summary prospectus and carefully consider the investment objectives,risks, charges and expenses. For this and more complete information about the funds, investors should contact their advisors for a prospectusand/or summary prospectus or visit invesco.com/fundprospectus.Senior loans are extended by financial institutions to entities of below investment grade credit quality and are subject to significant credit, valuation and liquidityrisk. Convertible securities may be affected by market interest rates, issuer default, the value of the underlying stock or the right of the issuer to buy back theconvertible securities. Junk bonds have greater risk of default or price changes due to changes in the issuer’s credit quality. Junk bond values fluctuate more thanthose of high-quality bonds and can decline significantly over a short time. Fixed-income investments are subject to the risks associated with credit and interestrate fluctuations, both of which may negatively affect an investment in the fund.Source: ©2014 Morningstar Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers. It may not be copied or distributed and is not warranted to beaccurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. For the 3-, 5- and 10-year periods, respectively, asof Dec. 31, 2013: Invesco Convertible Securities Fund was rated 3 stars out of 74 funds, 3 stars out of 58 funds and 4 stars out of 46 funds; Invesco Senior Loan Fund was rated 5 stars out of 147 funds and 5stars out of 124 funds (no 10-year rating); and Invesco High Yield Municipal Fund was rated 3 stars out of 153 funds, 3 stars out of 124 funds and 4 stars out of 92 funds. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, ratings may have been lower. Ratings are based on a risk-adjusted return measure that accounts for variation in a fund’s monthly performance (includingthe effect of sales charges, loads and redemption fees, where applicable), placingmore emphasis on the downward variations and rewarding consistent performance. The top 10% of funds in a categoryreceive 5 stars, the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars and the bottom 10% 1 star. Each share class is counted as a fraction of one fund within this scale and rated separately,which may cause slight variations in the distribution percentages. Ratings for other share classes may differ due to different performance characteristics. Past performance does not guarantee future results.

iPad is a trademark of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc.Invesco Distributors, Inc.

in the

You don’t just need income. You need the right income. Look to Invesco.Download the freeInvesco US app for iPad.

March 24, 2014 B A R RON ’ S 41

Other VoicesViews from beyond the Barron’s staff n by Brian Luster and Steven Abernathy

All in the Family

I N THE LATE-18TH AND 19TH CENTURIES,Mayer Amschel Rothschild estab-lished five family banks, in Frank-furt, London, Paris, Vienna, and

Naples, and assigned one to each of hisfive sons. His action secured the assets ofEurope’s wealthiest family and preservedhis descendants’ control of their wealthand affairs for generations. It gave thesons the tools to do business on their ownand to cooperate with one another.In the present-day U.S., as in 19th-

century Europe, a family bank can pre-serve wealth, provide family members withindependent access to capital, and more—it can substantially lessen the taxes thatwealthy families pay on occasions of inter-generational wealth transfer. The U.S. hasalso democratized the idea of a familybank: A savvy investor can begin a familybank with as little as $1 million.For the Rothschilds, in a day when

government regulation of banking waslight to nonexistent, a bank was a busi-ness that did banking. In the 21st cen-tury U.S., a bank is much more compli-cated and much more heavily regulated.But when established and managed prop-erly, a family bank keeps assets withinthe family, brings thoughtful stewardshipto the family endowment, and encouragesa family’s legacy to thrive. It is not a tra-ditional brick-and-mortar lending institu-tion, not a partnership, and not a corpo-ration, but it does operate as an entityformally independent of the family.How does a family bank differ from a

commercial bank or a family asset-man-agement company? There are three nota-ble distinctions between a family bankand an outside institution.First, the family bank’s primary mis-

sion is the protection and stewardship ofassets as the family sees fit. It can pro-vide loans without a traditional institu-tion’s constraints and conditions. So, forexample, if an heir’s credit isn’t perfect,that could be irrelevant within the familybank, but would be a red flag at a tradi-tional one.Second, commercial banks and asset-

management companies are likely to offera breadth of services and products that

fall outside of the scope of traditionallending; the family bank does not.Third, under certain conditions, family

banks can forgive a loan, perhaps evengive the heir the loaned amount as a gift;whereas traditional institutions requirerepayment of loans—complete with inter-est and penalties when the agreementisn’t honored.How does a family bank work on a

practical level? Imagine that a family pa-triarch (doubling as president of a familybank) is approached by his enterprisingson for start-up capital. The son showsup with a solid business plan, and hasloan approval from outside institutions. Ifthe family bank green-lights his en-deavor, the interest on his loan can belower than a traditional bank wouldcharge. Family banks typically offer pre-ferred rates based on the IRS’ Applica-ble Federal Rate and subject to standardregulation.This may encourage entrepreneurship

and push young heirs to strike out ontheir own. If they succeed, they may winbig. If they lose, the blow could be soft-ened, because a family bank can forgivethe loan. If the venture fails, the son’scredit rating isn’t hurt.Education is another area for the

power of loan forgiveness. Suppose thepatriarch’s daughter seeks an educationloan. Her father may insist on measur-able performance and provide the incen-tives to help her focus. The terms of herloan might offer very low interest andeasy repayment, but the debt could growteeth if she drops out of school. On theother hand, the family bank could forgivethe loan if she achieves a specified grade-point average.Loans won’t always be excused, how-

ever, because the family bank’s capitalmust be maintained and grown for thestructure to work.

Creating a family bank can be compli-cated. The patriarch often starts with alimited-liability corporation and an irrev-ocable trust. He becomes general partnerof the corporation and grantor of thetrust. The LLC will “wrap” the trust to

take advantage of larger gift-tax exclu-sions. At present, tax-free gifts to thebank could be as high as $8 million perperson, or $16 million for a couple.Over time, other people could also

fund the bank’s endowment, includingfamily members, other family trusts, or afamily business.Family banks can exercise more flexi-

bility than traditional institutions, reduceborrowing costs, protect capital from per-sonal creditors and litigators, and under-score a family’s values and legacy. Theyalso can exert financial control, such asthrough loan conditions, as well as pro-vide tax advantages.Family banks’ founders set business

rules that can be designed to reduce ar-bitrariness and calm the emotions thatmay surround a family’s financial interac-tions. If the firstborn daughter requests

Americans have the optionof creating family banksto reduce borrowing costs,protect capital, reinforcevalues, control heirs,and reduce taxes.

TimFoleyforBarron’s

OTHER VOICES essays should be about 1,000words, and e-mailed to tg.donlan@barrons.com.

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March 24, 2014

Table of Contents

s 2014 Dow Jones & Company, Inc. All Rights Reserved.

Taking a Shine to Apple Jack Hough 19The launch later this year of what’s sure to be a bigger iPhone is likelyto boost earnings and rekindle interest in the company’s shares.

Principal Appreciation Jack Willoughby 21Wall Street is overlooking Principal Financial’s transition from insurerto lucrative global money manager. Why the shares are set to rally.

Visteon Picks Up Speed Christopher C. Williams 23With a shift away from lower-margin businesses, the auto supplier ismaneuvering to be a key player in cockpit electronics.

Drilling Deep for a Turnaround David Englander 27SIZING UP SMALL-CAPS:McDermott’s new CEO is setting the company ona better course after a botched strategy shift sank profits.

Mutual Funds: The Chosen Few Lawrence C. Strauss 31PROFILE: The RiverPark/Wedgewood Retail fund has achieved successthrough a small handful of big bets. Making the cut: Express Scripts.

Selectivity Is Key Reshma Kapadia 36Q&A WITH MARKO DIMITRIJEVIC: Everest Capital’s founder explains hishedge fund’s index-beating approach to emerging and frontier markets.

Home-Field Advantage Brian Luster and Steven Abernathy 41OTHER VOICES: How a family bank can preserve wealth, provide flexibleloans to family members, and substantially reduce taxes.

Seeking Stable Solutions Thomas G. Donlan 43EDITORIAL COMMENTARY: Russia will eventually come around, if the U.S.and the European Union exercise patience and reward improvement.

ColumnsUp & Down Wall StreetRandall W. ForsythInvestors unfazed by Putin’stakeover of Crimea may wantto brush up on history. 5

StreetwiseKopin TanKey transitions as the bullmarket enters middle age. 9

Review & PreviewRussia’s imperial overreach.A challenge to high shippingcosts in Hawaii. 14

Follow-UpYahoo!. MSG. 16

Tech TraderTiernan RayOpportunities for Microsoftin cloud computing. 29

The Electronic InvestorMike HoganDoubling $1 million with theDividend Aristocrats. Plus,Gadget: 1Password. 30

Fund of InformationBeverly GoodmanMore evidence that investorsin actively managed funds don’tget their money’s worth. 34

ETF FocusBrendan ConwayWhether biotech is in aboom or a bubble, cautionis warranted. 35

Speaking of DividendsShirley A. LazoDid earnings weather winter’schill? Plus, Steel Dynamics andRaytheon raise payouts. 38

D.C. CurrentJim McTagueRussian aggression could affectU.S. military-base closures. 39

SPECIAL REPORT: OUR 10th ANNUAL LIST

In a League of Their OwnTop-Notch: From Warren Buffett to Mark Zuckerberg, these30 leaders possess qualities that set them apart from rivals. S2

Pullouts Start After Pages 22 and M28

Charting the MarketM2

The TraderStocks gain ground, despiteFed-induced fretting. M3

European TraderA potential jackpot in sharesof lotteries operator Gtech. M6

Asian TraderBank of China: the safer pickas credit conditions worsen. M7

Emerging MarketsRussia is too risky. M7

Winners & LosersM8

Current YieldHint of a future rate hike. M9

13D FilingsM10

Research ReportsM13

Insider TransactionsM13

Striking PriceThe fear gauge goes global. M15

Market WatchM16

Index to Companies . . . . . . . 10

Mailbag The problem withpaying college athletes . . . . . 42

Fund Scope andScoreboard . . . . . . . . . . . . . . . . 33

Classified . . . . . . . . . . . . . . . . . . 33

Eaton Vance spots tomorrow’sgame changers in health care.Barrons.com 25

BARRON’S (USPS 044-700) (ISSN 1077-8039) Published everyMonday. Editorial and Publication Headquarters: 1211 Avenueof the Americas, NewYork, N.Y. 10036. Periodicals postage paidat Chicopee,MA and othermailing offices. Postmaster: Send ad-dress changes to Barron’s, 200 Burnett Rd., Chicopee,MA01020

WORLD’SBEST

CEOs

42 B A R RON ’ S March 24, 2014

MailbagMailbag

“The Nasdaq has not yet reached its old record highs,and it was only when those valuations were exposedthat the market finally succumbed.” MATT FOX, Vernon, Conn.

Send letters to:Barron’s Mailbag, 1025 Connecticut Ave., Washington, D.C. 20036. Fax: (202) 862-6633.E-mail: Mail@Barrons.com. To be considered for publication, correspondence must bear thewriter’s name, address and phone number. Letters are subject to editing.

How Time Flies

To the Editor:The last time the Federal Reserve pub-licly made negative remarks about thestock market, it was Alan Greenspanwith his “irrational exuberance” com-ment (“Happy Birthday, Bull,” Up &Down Wall Street, March 10). If one soldat the time of Greenspan’s remarks, onewould have missed quite a bit of the bullrun in the late ’Nineties.The Nasdaq has not yet reached its

old record highs and it was only whenthe absurdity of those valuations wereexposed that the market finally suc-cumbed. And the most egregious bubblewas in stocks like Enron, WorldCom, andTyco where fraud, not exuberance, re-vealed the fatuous prices of the entirestock market.

MATTHEW S. FOXVernon, Conn.

To the Editor:The recent five-year bull market run ofthe Standard & Poor’s 500 has been a cy-clical bull with most of its run still insideof a secular bear market. Until the S&Pclosed above its 2000 high of 1527 inMarch 2013, the S&P was technically stillin a secular bear market. If the S&Pstays above 1527, then future chartists willuse this point as being the start of a newsecular bull market for this index. TheNasdaq, until it closes and stays above5048, is still in a secular bear market.

STEVE MARTINNorthbrook, Ill.

Pay for Players

To the Editor:I would offer two considerations to the

proponents of paying college athletes(“Professional Responsibility,” EditorialCommentary, March 10).First, if we really want to pay football

and basketball players what they pre-sumably deserve, then we need to applyfree-market principles consistently. Par-ents of participants in money-losingsports will be making donations to fundtheir sports’ budget gaps. Same goes fornonstarters on the courts and gridirons.After all, no one is tuning in to ESPN towatch players who rarely see the field.Second, what of the tremendous value

afforded the athletes from national TVexposure? The NBA and NFL can’t draftand pay what they can’t see. Add that tothe $200,000 cost of a four-year collegeeducation and I’d say nearly all the ath-letes are fairly compensated or overcom-pensated. Those athletes who disagreeare free to avoid exploitation on the manypublic fields and courts throughout ourgreat land.

STU HAASSeattle, Wash.

To the Editor:Unions and salaries for athletes in cer-tain college sports at a high level wouldsimply add to the decay and, in manyways, play into the hands of the big uni-versities and the laughable NCAA.Kane Colter, the spearhead of the

Northwestern University union, allegesthat he entered school as a pre-med stu-dent, but that the demands of the foot-ball program forced him to drop his ma-jor to psychology. Anyone smart enoughto be admitted to Northwestern’s pre-med program should be smart enough tomake some intelligent decisions abouthis future.

MICHAEL BLECHAPark Ridge, Ill.

seed capital for her start-up business, hertwin brother wants money to pay for lawschool, and the youngest son wants topurchase a sports car, trust documents cancodify family-bank policies. The potentialborrowers will know the purposes andintentions for which loans will beapproved, and on what terms.The family bank can also make outright

gifts. A bank founded by a family with astrong attachment to education may offerto match the earned salary of any familymember who goes into teaching.The patriarch usually forms a family

bank to protect family assets. Suppose amarried couple borrows from the hus-band’s family bank on an interest-only loanto purchase a home. Instead of a typicalmortgage, the loan might vest ownershipof the home in the bank’s name. If the cou-ple were to divorce, the family bank wouldenforce its lien, take possession of thehome, and leave the wife with no claim.Governance of a family bank is open to

various possibilities. The bank will have anadvisory committee whose members mayinclude professionals or just members ofthe immediate family.The final group may be made up of fam-

ily and nonfamily members, and there maybe a separate review committee serving toeducate and prepare heirs for eventual de-cision making. Those on the review com-mittee could have the opportunity to sit inon advisory board meetings and developexperience learning how the review pro-

cess works. Depending on the family’s val-ues and altruism, heirs may be encouragedto join a helping profession that does notpay a high salary but makes a contributionto the community. The family bank mightmatch the salary 100% (or a different per-centage) tax-free.Both a traditional bank and a family

bank are obliged to ensure proper trans-fers of wealth and compliance with IRSrules. However, the family bank has thepower to enforce stipulations on heirs andthe recipients of gifts.As mentioned, loan conditions may be

contingent upon personal values, such asan emphasis on achievements in education,contributions to philanthropic causes, ordemonstrating business acumen throughdue diligence.These same factors may apply to gifts,

as well. Heirs may need to adhere to a par-ticular code of conduct in concert with thehead of the family: i.e., not abusing drugsor alcohol, completing a certain level ofeducation, or volunteering for a political,charitable, or other organization or causeof significance to the family.

STEVEN ABERNATHY AND BRIAN LUSTER co-founded The Abernathy Group II Family Office,which counsels affluent families onmultigenerational asset protection, wealth man-agement, and estate and tax strategies. It is in-dependent, employee-owned, and governed by anadvisory board of business and medical profes-sionals. Website: abernathygroupfamilyoffice.com.

“I knew I should have listened to my instinct and not grown up.”

TeresaBurnsParkhurstforBarron’s

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Reproduced with permission of the copyright owner. Further reproduction prohibited withoutpermission.