Add a new dimension to your clients’ portfolios

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Add a new dimension to your clients’ portfolios

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Presented by

Ken WhitleyPortfolio Manager

Flexible Plan Investments, Ltd.

Jerry WagnerFounder and President

Flexible Plan Investments, Ltd.

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Meet Jerry Wagner

President, Director and sole shareholder of Flexible Plan Investments, Ltd. since its formation in February, 1981

Designing methodologies and management of personal investment portfolios since 1969

Ran one of the first hedge funds in the early 70’s

EducationBachelor of Arts in Political Science, Michigan State University

MBA in Industrial Relations, Michigan State University

Juris Doctor degree, University of Michigan

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Introduction: Flexible Plan Investments, Ltd.

CLIENT COMMUNICATIONS:

OnTarget Monitoring

Quarterly Newsletter

Weekly Hotline

Daily Web Access

• Money manager for over 30 years

• One of the earliest practitioners of active investing

• Wall Street expertise with a Midwestern heart Headquarters in Bloomfield Hills, MI

• Over $1 billion assets under management*

• 50+ employees

• Service and Compliance oriented

• Working with over 600 B/D’s & RIAs Nationally

* Approximate value as of June 30, 2011

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Who we are

Research

Ph.D led research department with over 75 combined years of professional experience in market analysis

Compliance

Over 100 years combined legal experience with three attorneys on staff

Dedicated Compliance Officer and staff

Service

Twelve external Regional Sales Managers

Eight person internal advisor support team

Client Services

Call center

Interactive website

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Meet Ken Whitley

Portfolio Manager, Flexible Plan

Successful 8-year career operating Third Day Advisors, LLC, a registered investment advisory firm, as principal and portfolio manager, founded in 2003

Over 20 years experience in software engineering, concluding with a position at Intel Corporation as an Engineering Manager and Program Manager overseeing development of software-based products

Education

Bachelor of Science degree in Computer Science, Indiana University of Pennsylvania

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Agenda

• Strategy Goals• The Proprietary Indicators• Position Sizes / Market Exposure• Tactical Blend vs. Tactical Blend Balanced• Position Allocation• Comments Regarding the Research Reports• Suggested Client Characteristics• Key Points

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Agenda


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Strategy Goals

• Capital growth every calendar year• Growth regardless of market conditions• Maximum drawdown of not more than 30% (Blend) /

20% (Blend Balanced)

$

t

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Agenda


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The Proprietary Indicators

Indicator Name Type Direction Look-Back PeriodAverage frequency

(in days)

KVR Momentum Long 7 days 5

TWH Momentum Long 1 day 34

HBS Momentum Short 26 days 14

AWS Over-sold Long 3 days 8

4d Over-bought / over-sold Long / short 4 days 28

CFK Over-sold Long Up to 200 days 15

RR Over-sold Long Up to 200 days 6

• All indicators except TWH evaluate both the NASDAQ 100 and S&P 500 indices.

• There is one signaling model used for both Tactical Blend and Tactical Blend Balanced.

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Agenda


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Position Sizes / Market Exposure

-50% -25% -20% Money Market

25% 50% 75%0%

10%

20%

30%

40%

50%

60%

Short Long

All positions are in 2x-leveraged funds. A 50% position is 100% exposure to the market indices for that day.

All assets in money market 35-60% of market days, depending on market environment.

Mar

ket

Day

s

Position Size

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Agenda


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Tactical Blend vs. Tactical Blend Balanced

Tactical Blend Balanced Position

Tactical BlendPosition

Short 50% 100% of indices Short 67% 134% of indices

Short 25% 50% of indices Short 33% 66% of indices

Long 25% 50% of indices Long 33% 66% of indices



Blended across three indices

An absolute return program

Trades both long and inverse funds

100% money market roughly half of market days

Most trades last two days or less

Returns have been non-correlated with US equity markets

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Tactical Blend vs. Tactical Blend Balanced

Source: Flexible Plan Investments’ Hypothetical Research Reports. Strategy returns shown are after 2% advisory fee. An establishment fee of 1.2% has been deducted at inception. The S&P 500 index shown is not tradable.

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Agenda


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Position Allocation – Example 1

When the model indicates the position to be 100% long (Tactical Blend only), using the 30/40/30 allocation …

• 30% will be in the NASDAQ 100 2x fund

• 40% will be in the Russell 2000 2x fund

• 30% will be in the S&P 500 2x fund

REMEMBER -

Exposure is 2x

A 50% long allocation is 100% exposure to the indices for that day.

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Position Allocation – Example 2

When the model indicates the position to be 25% short, using the 30/40/30 allocation …

• 7.5% will be in the Inverse NASDAQ 100 2x fund

• 10% will be in the Inverse Russell 2000 2x fund

• 7.5% will be in the Inverse S&P 500 2x fund

REMEMBER -

Exposure is 2x

A 50% short allocation is 100% exposure to the indices for that day.

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Agenda


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Comments Regarding the Research Reports

• Some hypothetical returns calculated from actual trades in analogous strategies

• Be careful making portfolio decisions based purely on the risk (standard deviation) figure

The risk figure will fluctuate depending on the time frame chosen. The possibility of being 200% or 150% long on any given day makes these aggressive programs.

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Agenda


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Suggested Client Characteristics

Portfolio:

• is under-exposed to tactical strategies• components are highly correlated

Client accepts:

• risks of leveraged and inverse funds• short-term capital gains and wash sales• “going (big) long” in the face of downturns• it should not be expected that “if the markets are going up,

the Third Day Tactical Blend strategies are going up”

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Agenda


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Key Points

The Third Day strategies seek to reduce risk and enhance performance by:

• being completely out of the market much of the time

• calculating each trade’s position size according to the historical success of the indicators that are operative for that trade

Tactical Blend and Tactical Blend Balanced are absolute return strategies, tending to produce returns in a non-correlated fashion to

1) the equity markets and

2) momentum or trend-following strategies

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Why Active Management?

• Strategies are actively risk managed

• Allocation shifts to seek protection against unnecessary risk

• Strategies draw upon a larger pool of investment options to take advantage of opportunities

• Those nearing retirement can benefit from the upside potential of exposure to stocks while having an active, risk-managed portfolio

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Why Strategic Diversification?

• The magic of diversification – below-average risk

• Many top performing strategies have larger draw downs; diversifying allows their inclusion in non-aggressive portfolios

• Markets change and what works changes

• Every strategy works until it doesn’t

• A possible solution to Black Swans

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Three Routes to a Strategic Diversification Solution

Account Size

$5,000 and higher Dynamic Fund Profiles - Includes: Patent pending software from Morningstar/Ibbotson; 5 suitability-based portfolios exclusively uses the Evolution Managed Funds for maximum fee reduction; and invests in ETF’s, stock baskets and funds. With 75 bps fund credit that lowers the client fee to just 1.25% and you still make 1.0% (Small Accounts are capped at a 2% annual fee before credits

$25,000 and higher a. Optimizer - Create Your Own Portfolio of Strategies. The Flexible Plan Illustration Generator allows you to optimize the portfolio of 5 to 8 actively managed strategies.

b. Multi-Strategy Portfolios Custodied at Charles Schwab & Co., Inc. (“Schwab”) – Blended portfolios utilizing 5-10 strategies chosen from a universe of dozens of actively managed strategies; five suitability

profiles; traded daily*

$100,000 and higher Strategic Allocation Service (SAS)- designed for our Premier Accounts - Flexible Plan selects the strategies suitable for the risk profile and investment time horizon, monitors their performance, and reselects and

reallocates as necessary to meet the OnTarget goals

Based on Investable Assets

These materials have been independently produced by Flexible Plan Investments, Ltd. Flexible Plan Investments is independent of, and has no affiliation with, Charles Schwab & Co., Inc. or any of its affiliates. Schwab is a registered broker-dealer and member SIPC. Schwab has not created, supplied, licensed, endorsed, or otherwise sanctioned these materials nor has Schwab independently verified any of the information in them. Flexible Plan Investments provides you with investment advice, while Schwab maintains custody of your assets in a brokerage account and will effect transactions for your account on our instruction.

* The available Evolution Funds are: All-Cap Equity, Alternative Investments, Market Leaders and Managed Bond available through Direxion Funds @ direxionfunds.com

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SAS Selects From Over 70 Actively Managed Proprietary Strategies

• Each portfolio holds up to 10 actively managed strategies.

• Portfolios are fully discretionary, quantitative, non-subjective and ACTIVE.

• Designed to deliver “DEFENSE” in falling markets and “OFFENSE” in rising markets.

• Independent Custodian is Trust Company of America (TCA).

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How are the Strategies That Make Up a SAS Profile Chosen Each Quarter?

A SAS portfolio is drawn from scores of active strategies to create what FPI believes is the best combination for your client’s risk profile.

Source: Flexible Plan HYPOTHETICAL Research Report. Returns shown are after 2% management fee. An establishment fee of 1.2% has been deducted at inception.

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SAS Profiles Utilize a Blend of Strategies

• Global Maturities

• Lifetime Evolution

• Lifetime Evolution - 100% EMF

• Managed Income

• Managed Income Aggressive

• Market Leaders Strategic

• Market Leaders Strategic

• Market Leaders Strategic - 100% EMF

• Next Generation Asset Allocation

• Select Alternatives

• Select Alternatives - 100% EMF

• Self-Adjusting Trend Following

• Systematic Long/Short Bond Trading

*Third Quarter, 2011

Current* profile portfolios are using:

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• Market Leaders Strategic / 100% EMF with Alternative

• Volatility-Adjusted NASDAQ

• Systematic Long/Short Bond Trading

• Market Leaders Strategic Managed

• Evolution Alternative Investment Fund

Multi-Strategy PortfoliosUtilize a Blend of Strategies Current* profile portfolios are using:

*Third Quarter, 2011

• Strategic High-Yield Bond

• Self-Adjusting Trend Following

• Bear Necessities

• Managed Income Aggressive

• Best Tech

• Third Day Tactical Blend Balanced

LIMITED TIME NON-PCRA BONUS!

• Bring new assets or transfer new assets to FPI actively managed strategies at our new custodian (PCRA accounts not eligible) before October 31, 2011.

• We will permanently reduce our portion of the fees by 20 bps on the first $500,000 of your client's assets.

• We make it easy for clients who select Flexible Plan's active management strategies at our new custodian.

OFFER EXPIRES OCTOBER 31, 2011

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SAS Portfolios are Designed to Deliver “Defensive” and “Offensive” Strategies

Each of the over 70 different strategies available for SAS is actively managed, follows a rules-based discipline, and has its own set of offensive and defensive tools:

• Rotating toward strength and avoiding weak assets

• Stop loss limits

• Tactical market indicators

• Bonds, stock and alternatives diversification

• Hedging against increased volatility

• Shifting to cash or inverse funds during market meltdowns

• Strategic diversification

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Advisor Tools & Resources

• Manage client expectations with OnTarget Investing

• Easily illustrate strategy performance through Flexible Plan’s Research Reports

• Professionally designed marketing materials

• Excellent, friendly client service center

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OnTarget Investing

The Quarterly OnTarget Report provides multiple sources of discussion with clients. Each illustrated tool demonstrates that the client’s portfolio remains OnTarget:

•Volatility Barometer•Risk Target •OnTarget Monitor

• Defines what successful investing means to your client

• Monitors the client’s investment target

• Sets and sustains client expectations

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3 Easy Ways to Illustrate to Clients

Source: Flexible Plan Research Reports, 1/1998-6/2011 and 1/1998-8/2011 Hypothetical Research Reports. Returns shown after fees. Disclosure Page is an integral part of this presentation.

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Third Day Strategies Flyer

Brochures available upon request.

Contact our Internal Sales Department

800-347-3539 ext. 2 or [email protected]

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Doing Business is Easy

You fax us:

1. A recent client statement

2. A one-page client suitability questionnaire

We will send you: • A personalized

client proposal• Appropriate

Research Report

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ACT NOW!

To help you get started, we’ll give you this

presentation PLUS 10 brochures and a research report absolutely FREE!

Contact [email protected] to receive yours today!

mailto:[email protected]

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DisclosuresFlexible Plan Investments does not render or offer to render personalized tax, legal or accounting advice. Do not act or refrain from acting on the basis of any content included herein without seeking the appropriate financial or other professional advice. Investments in mutual funds are subject to market risk, including the potential loss of principal invested. Rafferty Asset Management, LLC serves as the Evolution Managed Funds' Investment Adviser and Flexible Plan Investments, Ltd., serves as the Funds' sub-adviser. Read the Funds’ Prospectus and Flexible Plan Investments' Brochure Form ADV Part 2A carefully before investing. You should carefully consider the investment objectives, risks and the charges and expenses of the Funds before investing. The Funds' SAI and Prospectus contain information regarding the above considerations and more. You may obtain both, as well as current month-end Fund performance information, at http://www.direxionfunds.com/evolution; by calling Direxion Funds at (800) 851-0511; or writing Evolution Managed Funds, P.O. Box 1993, Milwaukee, WI 53201-1993. Fund investment return and principal value will fluctuate; an investor's account may be worth more or less than its original cost; and is subject to a number of risks that could affect its value. Investments in mutual funds are subject to market risk, including the potential loss of principal invested. Investing in the Funds may be more volatile than investing in broadly diversified funds. Current performance may be lower or higher than the performance quoted. Returns and portfolio values are provided for information purposes only and should not be used or construed as an indicator of future performance, an offer to sell, a solicitation of an offer to buy, or a recommendation for any security. Flexible Plan Investments, Ltd. cannot guarantee the suitability or potential value of any particular investment.

The performance results depicted have been produced by application of selected mathematical calculation criteria to historical price data. Annual returns are compounded weekly and are inclusive of the last full trading week of the year, but may not necessarily include the last trading day of the year. Research Report results are NOT represented as actual trading or client experience nor do they reflect the impact on decision making of economic or market factors experienced during actual management of funds. Performance between selected dates may be misleading as indicative of overall performance of a strategy since the dates, chosen by the operator of the program are susceptible of having been selected to present optimum performance. The maximum investment advisory fee is 2.6% yearly, dependent upon assets under management and is deducted quarterly. Expenses of the funds or sub-accounts are included to the extent they are reflected in the NAV. Other fees may apply. Sub-accounts of variable annuities, in addition to the expenses of a mutual fund, have mortality, administrative and other charges. All expenses are required to be disclosed in each investment's prospectus available from your financial representative and the product provider. Distributions have been reinvested. When provided, dividends are reinvested for indexes. In those cases where indexes do not provide dividend information, those returns would be understated.

As individual tax rates vary, taxes have not been considered. Various minimum-holding periods for each fund or sub-account may be utilized to comply with trading restrictions. Advisor reserves the right to change these periods. No index is directly tradable. Actual investment performance of any trading strategy may frequently be materially different than the results shown. Some funds/sub-accounts used in the model may not be available for future use. As supplemental information, a listing of all assumed trades and other data used to generate the referenced results is available upon requests. Inquiry for more current results is advised. Inherent in any investment is the potential for loss as well as the potential for gain. A list of all recommendations made within the immediately preceding year is available upon written request. The performance data quoted on reverse represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate; and investors’ shares, when redeemed, may be

worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Inherent in any investment is the potential for loss as well as the potential for gain. A list of all recommendations made within the immediately preceding 12 months is available upon written request.

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Thanks for attending!

Questions?

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Get Started Right Away!

Contact our Sales Team for a secure password and a personally guided tour of the advisor tools available to you

Email: [email protected]

Phone: 800-347-3539 ext 2 or 248-642-6640 (Metro Detroit)

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.For Investment Professionals Only.

mailto:[email protected]

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Add a new dimension to your clients’ portfolios