STATEMENT OF UNDERSTANDING

Transcription

1 STATEMENT OF UNDERSTANDING I/We have read the following and understand the risks of investing in the indicated Third- Party Money Manager Strategies and Mutual Funds. Alpha Investment Management Bonds Strategy* LOW-RISK THIRD-PARTY MONEY MANAGER STRATEGIES Alpha Bonds strategy combines conservative bond funds with Alpha s fourth quarter power periods to create a unique solution to investing for income with the goal of increasing the asset base at a rate greater than inflation after taxes. This strategy uses a combination of short-term and intermediate term bond funds. From January 1 until the last 2 trading days of October, the strategy holds a position of 70% intermediate-term bond funds and 30% low duration bond funds. Beginning with the last 2 trading days of October until December 31, 40% of the portfolio remains in intermediate-term bond funds while 60% of the portfolio is devoted to three power period trades invested in a Russell 2000 Index Fund leveraged by 50%. While not invested in the three power period trades, 60% of the funds are held in cash or money market funds. Alpha Bonds Strategy will have stock market equity exposure of only 8% the fourth quarter of each year using a 1.5 Beta Russell 2000 Small Cap Index. Please see the Leverage Disclosure in the General Disclosures section. Anchor Capital Management Hedged Fixed Income Strategy* The Hedged Fixed Income strategy is a tactical fixed income strategy that pursues income from a core allocation to High Yield Corporate Bonds while dynamically hedging against interest rate and price volatility. The Hedged Fixed Income strategy allocates 25% of holdings to a core portfolio of High Yield Corporate Bond related mutual funds and ETF s. The remaining 75% is allocated to the Anchor Tactical High Yield Bond Model, investing in High Yield Bond index funds during rising price trends, and in either rising or falling interest rate funds during periods of heightened volatility The Hedged Fixed Income strategy seeks to vary exposure to the High Yield Bond asset class through tactical trading and interest rate hedging. Investments are made through either long or inverse ETF s, Closed End Funds and Mutual Funds, and dynamically adjusted with a focus on risk management. The Hedged Fixed Income strategy was constructed retroactively for the periods January 1, 2007 to December 31, 2014, combining proprietary trading models utilized in live client accounts managed by Anchor Capital Management. Anchor Capital Management - Tactical MBS Strategy* The investment objective of the Tactical MBS strategy is to pursue a combination of income and price appreciation while seeking to protect against potential downside risks associated with interest rate and REIT and mortgage backed securities volatility. The Tactical MBS strategy allocates holdings across multiple quantitative trend following strategies that evaluate short, intermediate and long term price trends in the mortgage-backed bond sector, REIT s and interest rates. The Tactical MBS strategy invests in long or inverse Exchange Traded Funds (ETF s), Closed End Funds and Mutual Funds. Anchor Capital Management Tactical Municipal Bond Strategy* The Tactical Municipal Bond strategy pursues tax-free income while seeking to protect against the potential downside risks associated with interest rate and credit volatility. The Tactical Municipal Bond strategy allocates holdings across multiple quantitative trend following strategies that evaluate short, intermediate and long term price trends in U.S. municipal bonds and interest rates. The strategy employs a dynamic approach to risk management including duration exposure, defensive cash, and interest rate hedging. Investments are made through either long or inverse ETF s, closed-end funds and mutual funds, and dynamically adjusted with a constant focus on risk management. To avoid single issuer risk and provide daily liquidity, the strategy does not invest in individual bonds. Kensington Analytics Managed Income Strategy The Managed Income strategy is designed to generate stable above average total return, benefitting from high dividend income plus capital appreciation, with low drawdown of principal. The Managed Income strategy relies on a purely quantitative investment process within the high-yield fixed income market. The Managed Income strategy invests in a diversified mix of high-yield mutual funds when market conditions are favorable The Managed Income strategy shifts to a 100% defensive mode in money market and / or U.S. Treasury securities when market conditions are unfavorable. February 7, 2018 Page 1 of 6 Client Initials Client Initials

2 Preston Wealth Advisors Portfolio Strategy The Income Portfolio strategy is designed for investors who are seeking a mix of income and investment appreciation. Utilizing a tactical investing approach, the Income Portfolio strategy buys and sells up to a half dozen carefully selected funds, purchasing the best performing fund in each of the targeted sectors. Outperforming investment sectors are over weighted within the portfolio in order to maximize returns. No single position will account for more than 50% of the portfolio, and if indicators predict a downtrend in the fixed income space, the portfolio will be moved partially or entirely to cash to preserve principal investment. In addition to traditional sectors such as short-term government, municipal and corporate bonds, the Income Portfolio strategy may also invest in sectors such as global bonds, high yield bonds, convertible bonds and utilities. Any trading fees are separate from and in addition to Horter s advisory fees. Please consult the custodial fee schedule for applicable trading fees. Wilbanks, Smith & Thomas Credit Select Risk Management Strategy The investment objective of the WS&T U.S. Bond strategy is to seek total return from income and capital appreciation. WS&T U.S. Bond strategy allocates assets in any combination of High-Yield Securities and Investment Grade Securities (intermediate U.S. Government Securities, Short-Term Treasuries), or 100% in Short-Term Investment Grade Bonds, using a proprietary quantitative rules-based model. WS&T U.S. Bond strategy employs a combination of short and intermediate trend-following techniques to identify periods of favorable or unfavorable market conditions for High-Yield Securities. WS&T U.S. Bond strategy defaults to the high yield asset class unless model has issued a sell signal allocating funds to investment grade fixed income. WS&T U.S. Bond strategy invests primarily in ETF s. Any trading fees are separate from and in addition to Horter s advisory fees. Please consult the custodial fee schedule. Anchor Tactical Credit (ATCSX) LOW RISK MUTUAL FUNDS The Anchor Tactical Credit Strategies Fund s primary investment objective is to provide total return from income and capital appreciation with a secondary objective of limiting risk during unfavorable market conditions. The Anchor Tactical Credit Strategies Fund seeks to achieve its investment objective by allocating assets among various strategies based on the adviser s research and analysis regarding market trends. The fund primarily takes long and short positions in securities that provide returns similar to high yield corporate bonds. The Anchor Tactical Credit Strategies Fund primarily invests in Exchange Traded Funds (ETF s), mutual funds, derivative instruments including total returns swaps and credit default swaps, U.S. and foreign fixed-income securities of any rating and U.S. or foreign cash equivalents. The Anchor Tactical Credit Strategies Fund will attempt to meet the Fund s secondary objective by hedging when it believes security prices will decline. This includes increasing allocations to cash equivalents or U.S. Treasury securities, purchasing inverse mutual funds or ETF s, or selling short ETF s or securities believed to have a high correlation to high yield bonds. Anchor Tactical Municipal Strategy (ATMSX) The Anchor Tactical Municipal Strategies Fund seeks to provide total return from income and capital appreciation with a secondary objective of limiting risk during unfavorable market conditions. Generally the Fund s advisor does not attempt to evaluate individual securities. The decision to buy or sell Fund holdings will be made based on advisor developed trend and risk models that evaluate current market conditions and guide the Fund s advisor in determining the appropriate exposure level to the municipal bond market. The Fund s advisor has contractually agreed to limit the Total Annual Fund Operating Expenses to a maximum of 2.25% of average fund assets. These represent the regular and recurring expenses incurred to operate the fund, and the percentage will decline as fund assets grow. Fund Operating Expenses are paid out of fund assets rather than being charged separately to investors. Fund Operating Expenses do not include Horter s advisory fee, which is charged separately to investors. The Fund may invest in inverse funds linked to U.S. Treasury securities when the advisor believes this strategy will provide an effective hedge for interest rate risk. BTS Tactical Fixed Income (BTFIX) The BTS Tactical Fixed Income Fund s primary investment objective is to provide total return Under normal circumstances, the BTS Tactical Fixed Income Fund invests (long or short) at least 80% of its assets in fixed income securities of domestic and foreign issuers or counterparties. BTS Asset Management, Inc. seeks to achieve the Fund s investment objective by investing primarily in a portfolio of fixed income securities without restriction as to maturity, credit quality, type of issuer, country or currency. BTS uses an active trading strategy based on a proprietary tactical asset allocation strategy to take advantage of trends and momentum in the market. The Fund will seek primarily to invest in cash equivalents or enter into certain derivative transactions to hedge against adverse price movements when BTS Asset Management, Inc. believes that the market conditions are unfavorable for investing in fixed income securities February 7, 2018 Page 2 of 6 Client Initials Client Initials

3 Redwood Volatility Fund (RWDYX) The Redwood Managed Risk Volatility Fund seeks a combination of total return from income and prudent management of portfolio downside volatility and downside loss. The Redwood Managed Risk Volatility Fund is generally designed to mirror the Redwood Managed Risk Managed Strategy. Investors should be cautioned, however, that the actual performance of the Fund may differ materially from the performance of the Managed Strategy. In particular, the Fund, unlike the Managed Strategy, may employ leverage and may purchase closed-end high yield bond funds The Fund s advisor uses a quantitative program that seeks to invest in diversified high yield bond funds, bank loan funds, multisector bond funds and other fixed income funds with similar characteristics when the high yield bond and bank loan markets are trending upwards and short-term fixed income securities when the high yield bond and bank loan markets are trending downwards. The Redwood Volatility Fund has a short-term redemption fee, equal to 1% of the sale amount, for any shares sold within 30 days of purchase. WST Credit Select Risk Managed Fund (WAMIX) The investment objective of the WSTCM Credit Select Risk-Managed Fund is to seek total return from income and capital appreciation. To achieve its investment Objective, the Credit Select RM Fund will generally invest in a combination of (i) U.S. high-yield debt securities and (ii) U.S. investment grade debt securities and U.S. Treasury debt obligations. Under normal circumstances, at least 80% of the WST Credit Select Risk Managed Fund s net assets will be invested direct or indirectly in U.S. Bonds. WST Capital Management allocates assets between High-Yield Securities and Investment Grade Securities using a proprietary quantitative model, it s Credit Select Risk-Managed Strategy. This strategy employs a combination of short-, intermediate-, and long-term trend-following techniques to identify period of favorable or unfavorable marketing conditions for High-Yield Securities. MODERATE-RISK THIRD-PARTY MONEY MANAGER STRATEGIES Alpha Investment Management Mid-Cap Power Index Strategy The Mid-Cap Power Index strategy is an asset allocation strategy which seeks to exploit two seasonal influences on the stock market. These seasonal forces have historically skewed returns into certain months of the year and specific sub-periods in the final three months of the year The Mid Cap Power Index strategy is constructed by holding an S&P Mid Cap 400 Index fund from late-october through May 31; then holding an Intermediate Treasury Index fund from June 1 through late October During the fourth quarter of each year, the strategy raises the beta of the mid-cap index fund by 50% during three power period trades totaling 20 days. These three periods are influenced by end-of-month and holiday seasonal forces which historically have been particularly robust in small and mid-cap stocks. Please see the Leverage Disclosure in the General Disclosures section. Anchor Capital Management Alternative Equity Strategy The Alternative Equity strategy seeks to achieve above average total returns over a full market cycle with lower correlation and reduced risk when compared to traditional equity indexes. Investments are made through either long or inverse ETF s and mutual funds. The Alternative Equity strategy is initially constructed to hold 60% NASDAQ 100 mutual funds/etf s and 40% S&P 500 mutual funds/etf s. When in a bullish posture, the methodology selects mutual funds or ETF s indexed and/or highly correlated to the NASDAQ 100 and S&P 500 Indexes. When in a defensive or short position, the methodology selects cash or mutual funds/etf s that are inversely correlated to the NASDAQ 100 and/or S&P 500 Indexes. Anchor Capital Management Dynamic Real Estate Strategy The Dynamic Real Estate strategy seeks to achieve above average total returns over a full market cycle with lower correlation and reduced risk when compared to traditional Real Estate Sector indexes. The Dynamic Real Estate strategy allocates holdings across multiple quantitative trend following strategies that evaluate short, intermediate and long term price trends in the U.S. real estate sector, REIT s and interest rates. The Dynamic Real Estate strategy invests in long or inverse ETF s, Closed End Funds and Mutual Funds. To avoid single issuer risk and provide daily liquidity, the strategy does not invest in individual companies, bonds or real estate. Capital Markets IQ Disciplined Equity Growth Strategy (TCA Only) The primary investment objective of the Disciplined Equity Growth strategy is total return from capital appreciation. The Disciplined Equity Growth strategy is a long only, diversified (20 investments) trading strategy executed through internally generated price targets and downside risk mitigation techniques. Each security is monitored daily with a plan for risk control. Risk control is tightened as a stock nears its target price. The DEGP strategy evaluates three major factors related to stock movement: Market Covariance, Industry Cycle Analysis and Individual Investment Factors (e.g. Market Leadership). The DEGP strategy generates proprietary price targets, based on expected Earnings Per Share, Sales and Growth Rates, and only considers for inclusion stocks with a potential capital appreciation of greater than 30%. Stocks selected for the portfolio will typically represent the next phase of the economic cycle, as measured by analyst s opinions. The DEGP strategy invests in 20 positions, each representing 5% of the portfolio. Positions held are primarily large cap stocks. DEGP also invests in ETF s for exposure to the global market and to industries where there is no clear market leadership. At times, when conditions warrant, some or all of the 20 positions may be in cash or short-term investments. Due to complexities involved in trading DEGP, any liquidation requests will be processed once per business day at approximately 10:30am (Eastern). Liquidation requests received after this time will be processed at the designated trading time the next business day. February 7, 2018 Page 3 of 6 Client Initials Client Initials

4 Potomac Advisors EVO-1 Strategy The investment objective of the EVO-1 Strategy is to implement and maintain a strategy and discipline that preserves capital and provides higher absolute and risk adjusted returns than the stock market. The EVO-1 strategy is a market timing strategy applied to Rydex leveraged and unleveraged market index mutual funds. Buy, sell and hold decisions are generated by an algorithmic rule-based proprietary market timing system called EVO. The strategy is a completely mechanical, non-discretionary, rules-based system. The EVO 1 strategy invests in mutual funds (Rydex NOVA Fund, Rydex Inverse S&P Short Fund or money market fund). Allocations are made 100% into one of three funds at all times depending on whether the strategy anticipates a market advance (takes a 100% long 1.5X leveraged index fund position), a market correction (moves 100% to a money market fund) or expects to profit from a market decline (takes a 100% unleveraged short index fund position). Please see the Leverage & Hedging Disclosures in the General Disclosures section. Preston Wealth Advisors OTC Hedge Strategy The OTC Hedge Strategy is designed for investors who are seeking to enhance investment performance while reducing risk and protecting their assets from market volatility and uncertainty. The strategy invests in only 1 position at a time and/or cash. The strategy invests in the PowerShares QQQ Trust (QQQ), the ProShares Short QQQ (PSQ), ishares Barclay 20+ Treasury Bond ETF (TLT) and/or cash. The OTC Hedge strategy utilizes a disciplined tactical approach when determining whether to buy or sell one of the three carefully selected ETF s based on current market conditions. Any custodial trading costs are in addition to Horter s advisory fees. Please consult the custodian s fee schedule for applicable trading costs. Tactical Wealth Solutions Government Bond Strategy The goal of the Government Bond strategy is to provide growth opportunities while minimizing drawdowns. The program has an absolute return objective by utilizing a quantitative approach that combines economic forecasting models and technical systems. The strategy seeks to take advantage of the movements in the U.S. 30 Year Government Bond in both rising and falling interest rate environments. The strategy invests in U.S. Government Bond mutual funds and U.S. Government Bond Inverse mutual funds in an actively managed, tactical approach. The program manages risk by reducing position size and increasing its money market allocation during excessive market volatility. The strategy may not be suitable for conservative investors, particularly due to its use of leveraged mutual funds. Investors should expect some shortterm fluctuations of capital. W.E. Donoghue & Co. Power Dividend International Strategy The Power Dividend International strategy invests in the 50 highest dividend stocks (5 of the highest dividend paying stocks from each of 10 GICS Sectors) derived from the Bank of NY Composite ADR Index and rebalances quarterly. The Power Dividend International strategy daily employs an intermediate term tactical overlay whether to be bullish or in a defensive posture. The Power Dividend International Index Portfolio invests in ADR s (American Depository Receipts) of foreign companies. W.E. Donoghue & Co. Power Dividend Strategy The Power Dividend strategy invests in the 50 highest paying dividend stocks (5 each from 10 Sectors of the S&P 500) and rebalances quarterly. Past performance is no guarantee of future results and investors can lose money. The Power Dividend Index Portfolio has no guarantee of any returns or future values. Any reference to Current Portfolio Performance or historical rates of return does not guarantee any similar performance in the future. The portfolio can and will have stock market volatility and risk. The Power Dividend Index Portfolio weekly employs an intermediate term tactical overlay whether to be bullish or in a defensive posture. February 7, 2018 Page 4 of 6 Client Initials Client Initials

5 Anchor Tactical Equity Strategy (ATESX) MODERATE RISK MUTUAL FUNDS The Anchor Tactical Equity Strategies Fund seeks to provide total return from income and capital appreciation with a secondary of limiting risk during unfavorable market conditions. Under normal market conditions the Fund invests, directly or indirectly through unaffiliated ETF s and mutual funds, at least 80% of its net assets (plus the amount of borrowings, if any) in long and short positions in equity securities. This includes U.S. or foreign equity securities of any market capitalization and derivative instruments, including options, futures and total return swaps, designed to replicate some or all of the features of an underlying portfolio of equity securities. The Fund s advisor seeks to achieve the Fund s secondary objective by hedging the Fund s investment portfolio when it believes security prices will decline. The advisor will hedge by (i) increasing allocations to cash equivalents or U.S. Treasury securities, (ii) purchasing inverse mutual funds or inverse ETF s, and (iii) selling short ETF s or securities the advisor believes have a high correlation to the broader equity indices. Anchor Tactical Real Estate (ARESX) The Anchor Tactical Real Estate Fund seeks to achieve above average total returns over a full market cycle with lower correlation and reduced risk when compared to traditional real estate indexes. Under normal market conditions the Fund invests, directly or indirectly through unaffiliated ETF s and mutual funds, at least 80% of its net assets (plus the amount of borrowings, if any) in long and short positions in real estate related securities. This includes domestic and foreign real estate related securities, underlying funds that invest in domestic and foreign real estate related securities and derivative instruments, including options, futures and total return swaps, designed to replicate some or all of the features of an underlying portfolio of real estate related securities. The Fund s advisor seeks to achieve lower correlation and reduced risk relative to traditional real estate indexes by hedging the Fund s investment portfolio when it believes security prices will decline. The advisor will hedge by (i) increasing allocations to cash equivalents or U.S. Treasury securities, (ii) purchasing inverse mutual funds or inverse ETF s, and (iii) selling short ETF s or securities the advisor believes have a high correlation to the broader real estate market indices. Catalyst/Millburn Hedge (MBXIX) The Catalyst/Milburn Hedge fund s objective is superior risk-adjusted returns as compared with a typical long only, non-leveraged equity portfolio. The Catalyst/Milburn Hedge fund seeks to achieve its investment objective by investing in a portfolio comprised of (i) futures contacts, forward contacts and options on futures contacts and (ii) equity exchange traded funds and common stocks, designed to capitalize on the non-correlated, long term historical performance of the equity s and managed futures asset classes The Fund will also hold a large portion of its assets in cash, money market mutual funds,, and other cash equivalents, some or all of which will serve as margin or collateral for the Fund s investments. Millburn Ridgefield Corporation utilizes a set of trading systems, which were developed by the Millburn Ridgefield Corporation, to determine the Fund s asset allocations. The trading systems generate buy, sell, or hold decisions in a particular market based on the analysis of price movements in the market, non-price information like inventory levels, interest rate differentials, crop reports, etc., or a combination of both. Princeton Long/Short Treasuries (PTAIX) The Princeton Long/Short Treasuries fund s primary objective is capital appreciation with a secondary objective of providing income. The Fund seeks to achieve its investment objectives primarily through exposure to long and short futures contracts on longer-term US Treasury securities. The Fund may achieve such exposure to US Treasury futures by investing in a commodity pool that invests in such futures contracts or by entering into a swap or option with a counterparty on the returns of the commodity pool. The Fund may invest up to 25% of its total assets in commodity pools. Princeton Fund Advisors, LLC will consider a variety of factors in determining whether to sell a fixed income investment: changes in market condition, changes in credit quality, changes in prospects for alternative investment possibilities or return opportunities for other fixed income instruments, current return expectation of such security, any changes in interest rates, liquidity of the security, and cash needs of the Fund. WEDCO Power Dividend Fund (PWDIX) The Power Dividend Index Fund is generally designed to mirror the Power Dividend Index Managed Strategy. As the Fund does not have an established performance history, clients may be shown the performance history of the Managed Strategy as a proxy for the Fund Investors should be cautioned, however, that the actual performance of the Fund may differ materially from the Managed Strategy The Power Dividend Index Fund s primary investment objective is total return from income and capital appreciation. The Power Dividend Index Fund weekly employs an intermediate term tactical overlay whether to be bullish or in a defensive posture. The WEDCO Power Dividend Fund has a short-term redemption fee, equal to 1% of the sale amount, for any shares sold within 30 days of purchase. February 7, 2018 Page 5 of 6 Client Initials Client Initials

6 Allocation of investment portfolio to low & moderate risk strategies and mutual funds: The following percentage is the total of my investable assets that are invested across low risk strategies and mutual funds. % Client Initials The following percentage is the total of my investable assets that are invested across low risk strategies and mutual funds. % Client Initials To help ensure that investment recommendations are consistent with the client s risk profile, enter the percentage of the client s investments allocated to low and moderate risk separately managed strategies and mutual funds. * My Investment Portfolio consists of my/our investable assets such as stocks, bonds, mutual funds, ETF s, annuities, CD s and Partnerships. (The value of my/our Investment Portfolio is indicated on the Client Information form under the heading What Types of Investments Do You Own? ) Example: Assume the client s total investment portfolio is $1,000,000 and the total invested in various low risk strategies and mutual funds, across all accounts, is $150,000. The % listed would be 15% ($150,000 / $1,000,000) GENERAL DISCLOSURES Past performance is not indicative of future results. Investing is risky. Investors can and do lose money. These strategies are designed for a full market cycle and this time frame meets with my objectives. Any custodial trading fees, or other custodial fees, are separate from and in addition to Horter s advisory fees. Please consult the custodial fee schedule for other fees that may apply to your account. If leverage is employed by the strategy, the following disclosure applies: Leverage involves the use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. Conversely, leverage can magnify the losses of an investment during a down market. Given the potential risks involved, strategies employing leverage may not be suitable for conservative investors. Hedging Risk: The manager s use of inverse securities or other transactions to reduce risk involves costs and are subject to the manager s ability to predict correctly changes in the relationship of such hedge instrument to the strategy s portfolio holdings or other factors. No assurance can be given that the manager s judgment I this respect will be correct. In addition, no assurance can be given that the manager will enter into hedging or other transactions at times or under circumstances in which it may be advisable to do so. Investment strategies indicated with an asterisk (*) contain hypothetical, back-tested performance. Portfolio results reflect hypothetical, back-tested returns that were achieved by means of a retroactive application of a model and, as such, the corresponding returns have inherent limitations, including (1) the portfolio results do not reflect the results of actual trading using client assets, but were achieved by means of the retroactive application of a model, certain aspects of which may have been designed with the benefit of hindsight, and (2) back-tested performance may not reflect the impact that any material market or economic factor might have had on the advisor s use of the hypothetical portfolio if the portfolio had been used during the period to actually manage client assets, and (3) for various reasons, client may have experience investment results during the corresponding time periods that were materially different from those portrayed in the portfolio. Please see the investment manager s disclosures applicable to their specific strategies for additional information. Horter Investment Management, LLC has entered into a sub-investment advisory agreement under which Horter Investment delegates its discretionary authority under the Client Agreement with regard to the investment decisions made in the client s account to the strategy, an unaffiliated registered investment adviser. The client understands and consents to the delegation of such authority, which shall continue in force until revoked by Horter Investment Management, LLC or the client in writing. By signing below, I/We acknowledge that I/we have received and reviewed the Horter Investment Management Notice of Privacy Practices and ADV Part 2A Firm Brochure along with my advisor s ADV Part 2B Brochure Supplement. I also acknowledge receipt of the ADV Part 2A Firm Brochure of any money manager that I am investing in. Account Holders Signature: Print Name: Date: Signature: Print Name: Date: February 7, 2018 Page 6 of 6