Global Hedged Growth and Income Strategy VEGA

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1 Global Hedged Growth and Income Strategy VEGA Deliberate, Purposeful Investing January,

2 STAR Investment Management Platform Strategic. Tactical. Allocation. Risk. Developed Advisor driven model portfolios Core Satellite Concept Introduced Tactical Shifts Implemented utilizing Emerging Market Bonds. Equity Income Funds and Real Estate Annual Tax Loss Harvesting Introduced Introduction of Options based Hedging strategies Introduced Alpha, VEGA Separately managed accounts Harnessed the power of Volatility to generate income and manage risk Launched first actively managed Global Buy- Write ETF 2013 Expansion of Investment Management Team and formation of STAR Wealth Partners Cinque Partners, LLC Based in Los Angeles, former CIO Wells Fargo and his team of 3 CFA s Fusion Investment adds 3 CFA s and a specialty in Global ETF allocation 2

3 STAR WEALTH PARTNERS STAR Wealth Partners is a seasoned wealth management team with expertise in Global/US Hedged Equities and Global Tactical ETF Management. Partnervest Advisory Services LLC Actively managed global model portfolios and hedged strategies Fusion Investment Management Global strategy experts using Fundamental Valuation and Behavioral Finance Cinque Partners, LLC A seasoned analysis and research team from Wells Fargo Private Client group with expertise in the US market and conservative option strategies 3

4 Cinque Partners, LLC is part of the STAR Wealth Partners Investment Management team. They are a registered investment adviser based in Los Angeles, California comprised of 4 partners with 110 years of collective experience in the investment industry. The Investment Team is comprised of 4 CFA s and former members of the Wells Fargo Private Client Services Group. Cinque Partners specializes in managing a U.S. Large Cap Buy-Write Equity Fund and SMA. 8 year GIPS Compliant record 4

5 A seasoned research & analysis team Alan Adelman, CIO 30+ years experience Chief Investment Strategist, Wells Fargo Private Client Services CIO, Wells Fargo offshore trusts Jack Cowling, CFA 20 years experience Senior PM, Wells PCS Fred Wahl, CFA, CIMA 30+ years experience Fixed income manager, American Airlines pension plan Pierre Brachet, CFA 15 years experience Analyst, Wells Fargo PCS 5

6 VEGA Growth and Income Strategy Volatility Based Global Appreciation Objective Market appreciation and quarterly income from option premiums. Investor profile Clients seeking to increase investment income while keeping ahead of inflation Unique investment strategy Actively managed long portfolio with options hedge Seeks to outperform the equity risk premium with lower downside while offering income potential 1 Best use A core alternative designed to improve a portfolio s overall risk/reward ratio 1 Investing in options entails investment risks. See Disclosures for important risk information concerning investments in options. 2 No levels of distributions can be expected. There can be no assurance that this or any strategy, account, or the Benchmark will be able to implement its investment objective or avoid substantial losses. 6

7 Why a Buy-Write Strategy? * BXY: CBOE S&P 500 2% Out-of-the-Money BuyWrite Index This graph is for illustrative purpose only and is intended to reflect performance of the BXY and S&P 500 Benchmarks. This graph is not representative of actual investments or intended to reflect performance of any portfolio. These indicated indices are not intended to be investable or otherwise be used, in and of themselves, to determine which securities to buy or sell. Please see disclosures section for information regarding use of indices, including those that make up the Policy Benchmark. Past performance is no guarantee of future results. 7

8 Our View on Investing in Today s Markets Take more than you give up Capturing more of the market s upside and less of its downside will outperform the market over time. Draw from other sources of return Diversify long-only investments with a compelling non-correlated return source. More Return Sources, More Income yesterday Long-only today Additional sources of return Earn more income Target a 4% annual income, which most actuaries recommend for retirees. 1 Income 1 No levels of distributions can be expected. There can be no assurance that this or any strategy, account, or the Benchmark will be able to implement its investment objective or avoid substantial losses. 8

9 Strategy Focus Improve the long portfolio Seek better risk-adjusted returns using a multidiscipline process. Add a return stream: volatility When the markets are down, volatility tends to rise. We use options to benefit from this negative correlation, turning volatility into a source of additional return. 1 We will hedge more or less, based on our market outlook. Capture more income: premiums Over time, our hedging strategy pays option premiums that we convert to income. 2 How We Invest in Today s Markets Improved, multi-discipline long process Options premiums and dividends for income Volatility options hedge for extra return 1 Investing in options entails investment risks. See Disclosures for important risk information concerning investments in options. 2 No levels of distributions can be expected. There can be no assurance that this or any strategy, account, or the Benchmark will be able to implement its investment objective or avoid substantial losses. 9

10 Our Security Selection Process Seeking better risk-adjusted return Quantitatively, we rank securities on a combination of fundamental measures that we believe are most likely to drive excess returns. Qualitatively, we focus on what could go wrong with our selection and assumptions. Finally, we look at every security s marginal contribution to active risk. The overall portfolio goal: select the highest-ranked securities while keeping risk similar to the VEGA Policy Benchmark. Source: Factset. This graph is for illustrative purposes only and, as described below, reflects output of the Combo risk and return model as applied to a particular universe of securities for the referenced time period. This graph is not representative of actual investments or intended to reflect performance of any portfolio. The output of the Combo risk and return model is not intended to be investable or otherwise used, in and of itself, to determine which securities to buy or sell. Instead it is merely a quantitative tool used by Cinque Partners to inform its portfolio decisions. There is no guarantee similar investments will be available in the future. Past performance is no guarantee of future results. Output of the Combo risk and return model might differ based on the time period involved, changes in the effectiveness of the model itself and the factors used, and other factors that relate to the overall management of the model. This graph represents average, back-tested 12 month rolling performance from 12/01/04 to 12/31/2010 on S&P 500 constituents, rebalanced each month based on a composite of current valuation, momentum, quality, and target price components used in our stock selection models. Accounting data was lagged to adjust for look-ahead bias and reporting dates. To eliminate potential survivorship bias, data set also includes companies no longer in existence but operating at the time. For additional information and views regarding equilibrium based approach, please see Bob Litterman, Modern Investment Management: An Equilibrium Approach, John Wiley & Sons

11 Refined Options Hedging More upside, less drawdown We rely on listed options, for maximum liquidity and trading efficiency. 1 Covered call options ( buy-write ) are expected to be from 50% to 75% of the notional value of the portfolio. These caps seek to limit the drawdown that options are prone to in up markets. Flexibly Hedging Equity Volatility, Based on Our Views Lower market volatility less hedging Protected puts are from 0% to 25% of the portfolio s notional value. These options further limit downside with no impact on upside (net of premiums). Our risk optimization model helps us select a combination of options we believe offers the best upside/downside capture ratios. 1 Investing in options entails investment risks. See Disclosures for important risk information concerning investments in options. 11

12 Tactical Portfolio Management Total Equity Equity Domestic Equity Int l Equity Total Fixed Income Fixed Income US Gov t/corp Hi Yield/Credit Int l Gov./Corp Short term/ Cash Actual % % % % % % % % VEGA Target Range Actual % % % % % % % % VEGA Enhanced Target Range Percentages are usual and customary and may vary based on market conditions. 12

13 Why Manage to a Policy Benchmark? The strategies benchmarks establish both goals and accountability. The policy benchmark embodies the managers view of asset selection, risk and expected performance. The policy benchmark describes the target allocation. VEGA Policy Benchmark MSCI World Index 37.5% S&P 500 Buy/Write Index(BXM) 37.5% Barclay Intermediate Gov t Bond 25.0% Total Policy Benchmark 100% Benchmarks are deemed by Partnervest to correlate to the type of strategies offered by Partnervest, however there may be other benchmarks which more closely correlate. 13

14 VEGA Growth and Income Investment Options VEGA Core Plus Model $25,000 Minimum VEGA Separately Managed Account(SMA) $250,000 Minimum VEGA Enhanced Separately Managed Account(SMA) Includes Cash Management / Reinvestment feature of accumulated premiums $250,000 Minimum (Additional Management Fee: 0.25%) VEGA Institutional Optional Election, VEGA Enhanced with Individual Stock & Sector ETF s $1,000,000 Minimum VEGA Global Buy-Write Exchange Traded Fund- no minimum This is not a solicitation for the sale or purchase of the VEGA Global Buy-Write Exchange Traded Fund which may only be done through the ETF s prospectus. 14

15 A core investment clients can live and grow with Total Return Additional Information (Inception-to-Date) (As of 12/31/13) 3 Months 2013 Year-To- Date 1 Year 3 Years 5 Years Inception- To-Date 3 Alpha Beta Standard Deviation Upside Capture Downside Capture Dividend Yield Cinque Partners Strategy Net % 22.09% 22.09% 11.82% 12.60% 6.01% 0.1% % 75% 79% 1.88% Policy Benchmark % 22.52% 22.52% 12.07% 14.46% 5.91% -0.3% % 79% 85% N/A BXM 7.13% 13.26% 13.26% 8.00% 10.92% 4.67% -0.6% % 60% 68% N/A S&P % 32.39% 32.39% 16.18% 17.94% 7.02% 0.0% % 100% 100% 1.87% Past performance is no guarantee of future results. These results should not be interpreted as indicative of the future performance of the Cinque Partners Funds. Indicated returns are composite returns and are for informational purposes only. Composite data is based on a composite of all accounts with identical strategy managed by Cinque Partners for the referenced period, including accounts managed by the Cinque Partners investment team prior to formation of Cinque Partners. Cinque Partners is comprised of the identical investment team that has been managing such accounts since their inception and the investment strategy of such accounts remains the same. There is no guarantee similar investments will be available in the future. This presentation is not intended to be used, in and of itself, to determine which securities to buy or sell. The Composite and the Policy Benchmark are not investable, nor are the referenced indices. Please see the Disclosures section for information regarding the use of indices, including those that make up the Policy Benchmark. 1. Net of 0.90% management fee. 2. Policy Benchmark is based on 50% BXM Buy-Write Index and 50% S&P 500 Index to reflect a passive strategy with maximum written 50% on notional value. 3. Indicated returns are annualized for each of Cinque Partners composite, Policy Benchmark, BXM Index and S&P500 Index, for the period from inception of the first accounts invested using the Cinque Partners Large Cap Core Equity strategy on 1/1/2005. Source: FactSet, Morgan Stanley and PSN. The Composite, the Policy Benchmark and the referenced indices are subject to change. The views discussed herein are not intended to constitute investment advice with respect to the particular investment strategy referenced or the Policy Benchmark, nor a recommendation to purchase or sell any investment. * No levels of dividends or income can be expected. There can be no assurance that any strategy, account, index, the Composite or the Policy Benchmark will be able to implement its investment strategy, achieve its objectives or avoid substantial losses. 15

16 Alan Adelman STAR WEALTH PARTNERS Managing Partner and Chief Investment Officer, Cinque Partners, LLC Alan Adelman is Managing Partner and Chief Investment Officer of Cinque Partners, LLC. With over 30 years of professional investment experience, Alan leads the Cinque Partners and chairs its Investment Policy and Management Committees. Cinque Partners, LLC is a core equity manager formed in January 2012 from a team of highly accomplished and senior Wells Fargo investment professionals. An alternative to traditional long only equity styles, the Cinque Partners Strategy includes buywrites, protective puts and managed futures to improve downside protection and portfolio income. Alan joined Wells Fargo Private Client Services (PCS) in 2000 as its Chief Investment Strategist, providing investment strategy for 220 portfolio managers, 1200 registered representatives, 600 personal trust officers and 150 private bankers. He served as the Chief Investment Officer for Wells Fargo s offshore trust company and he oversaw the PCS Flagship Wells Fargo Signature Core Equity Strategy, which was used as the model for separate accounts, co-mingled funds and unit trusts. Education Bachelor of Science, Arizona State University United Asset Management Leadership Program at Harvard Business School Equity Derivatives Program at the Columbia University School of Business Professional Affiliations Heart of Los Angeles, Board of Directors, Chairman Nominating Committee Jewish Vocational Services, Board of Directors, Co-Chair Finance Committee University of California Los Angeles Geffen School of Medicine, Board of Visitors 16

17 Jack D. Cowling, CFA Senior Portfolio Manager and Partner, Cinque Partners, LLC Jack Cowling is a Senior Portfolio Manager and Partner of Cinque Partners, LLC. Jack coordinates the overall research activities and is the chief architect of the equity selection and portfolio construction models for a unique hedged equity investment process designed as a lower risk/volatility approach to managing a long-biased strategy. Jack joined Wells Fargo Private Client Services (PCS) in 2001 as Senior Portfolio Manager, providing investment strategy and advice for local Bank clients. He served as a senior member of the PCS Flagship Wells Fargo Signature Core Equity Strategy Team, which is used as the model for separate accounts, comingled funds and unit trusts. Prior to joining Wells Fargo, Jack was a Senior Partner and Manager of Quantitative Research for First Investment Advisors, a private client advisory firm based in Charlotte, North Carolina. Education Professional Affiliations Bachelor of Business Administration/Finance, Summa Cum Laude, University of North Florida Association of Investment Management and Research, Alternative Investment Conference Barra Equity Management Seminar CFA Institute, Charterholder & Member Austin Association of Investment Analysts Investment Management Consultants Association, Member Austin Lyric Opera, Board of Trustees, Marketing & Finance Committees Austin Lyric Opera Endowment Corporation, Board of Directors, Vice Chairman 17

18 Frederick W. Wahl, Jr, CFA, CIMA Senior Portfolio Manager and Partner, Cinque Partners, LLC Fred Wahl is a Senior Portfolio Manager and Partner of Cinque Partners, LLC. He has over 30 years of experience, primarily in the trust and investment management business (and 2 years as an institutional broker). Prior to joining Wells Fargo in 1992, he managed the fixed income portion of the American Airlines pension plan as a member of the in-house portfolio management team, and supported their plan sponsor group with equity analysis to aid in monitoring over 40 outside investment managers. Fred's early career consisted of work in traditional Trust investment management, bank portfolio management, and chief investment officer of a bank-owned registered investment advisor. While at Wells Fargo, Fred also worked with a select team of portfolio managers and relationship managers providing alternative investment and advisory services to ultra high net worth clients of Wells Fargo. Fred was one of the creators of the stock ranking and target price models used to assess attractiveness of holdings within Wells Fargo client portfolios. Education Bachelor of Science, Economics & Finance, Lehigh University. Certified Investment Management Analyst. Professional Affiliations CFA Institute, Charterholder and Member Dallas Association of Investment Analysts Investment Management Consultants Association 18

19 Pierre J.S. Brachet, CFA Portfolio Manager and Partner, Cinque Partners, LLC Pierre Brachet is a Portfolio Manager and Partner for Cinque Partners, LLC. Pierre provides research and analysis for the Hedged Equity model. He is also the acting trader for the firm. Pierre provided statistical analysis and data management support for Private Client Services (PCS) Wells Fargo Signature Core equity model as well as for the PCS Asset Allocation team from August 2001 through April Pierre joined Wells Fargo in 1996 and became a Associate Investment Manager in Education Brevet de Technicien Supérieur, International Trade, Carcouet, Nantes, France. Bachelor of Arts, Business Administration/Finance, Cum Laude, Portland State University. Master of Business Administration, Cum Laude, Portland State University. Professional Affiliations CFA Institute, Charterholder and Member Phoenix CFA Society 19

20 James Herrell, CFA Portfolio Manager and Partner, Partnervest Financial Group Jim brings a wealth of investment management experience to Partnervest, having spent 21 years in the asset management industry. He specializes in alternative assets, particularly hedged and absolute return strategies. A 1988 graduate of UC Santa Barbara, Jim honed his knowledge of hedged strategies as a trader at Kayne, Anderson in Los Angeles. In 1991, he became a partner and head trader at Strome & Co. in Santa Monica. In addition, he helped manage $25 million for George Soros Quasar Fund. Management expertise coupled with opportunistic investing across a broad spectrum of global markets enabled the fund to grow its assets from $50 million to more than $1.1 billion by the end of Relocating to Santa Barbara, Jim managed $250 million for the Trust & Investment division at Pacific Capital Bancorp, covering high net worth and institutional clients. In 2003 he helped develop and manage a quantitative multi-strategy hedge fund for the Santa Barbara Market Neutral Fund. He joined Partnervest in July, 2008, and launched the Structured Target Return program shortly thereafter. 20

21 Rebecca Valdez Associate Portfolio Manager, Partnervest Financial Group Rebecca joined Partnervest in 2007 and since her arrival has helped manage client accounts regarding initial investments and rebalance trading. She is knowledgeable in all strategies including STAR II models, STAR III Vega and STAR III Alpha. She works directly with advisors to help guide the clients to better understand the strategies implemented in their accounts. Rebecca also works directly with Jim Herrell to manage, enhance and reinforce management of the STAR Program. 21

22 Important Disclosure - PLEASE READ All investments and strategies involve risk, including without limitation, the ones presented herein. Such risks include, but are not limited to, possible loss of principal. Past performance is not indicative of future returns and does not constitute tax, legal or accounting advice. Moreover, investments are Not FDIC insured May Lose Value and Have No Financial Institutional Guarantee. Partnervest strategy returns are actual returns and presented net of fees, however a client s costs and returns may materially deviate from others in the strategies, and the strategies composite returns, due to various factors such as a client s size of account, timing of initial investment and frequency of contributions and withdrawals. The VEGA strategy, sub-advised by Cinque Partners LLC or another subadvisor at Partnervest s discretion, consists of Exchange Traded Funds (ETF s), Exchange Traded Notes (ETN s), individual equities or other securities (collectively securities ) designed to perform in accordance with the established Policy Benchmark 1. This Benchmark has been established with the goal of reducing portfolio volatility as compared to the S&P 500 Index. No statement is to be construed as investment advice for a particular client, or a recommendation to purchase or sell a security, including, without limitation, the STAR Global Buy/Write ETF. Securities may only be offered through a prospectus. Partnervest earns fees for providing investment advice to the ETF in addition to fees earned by managing client assets. Investors are advised to be especially diligent concerning options investing and prior to buying or selling an option, a person should read Characteristics and Risks of Standardized Options which is available through your financial advisor or online at Indices do not reflect actual portfolios or trading and the stated returns do not include investment management fees, transaction fees, dividends and other earnings and the timing of investment decisions, thus, they are not necessarily indicative of the allocation or return that an actual managed account in the future will or would have achieved. Any single past transaction presented is not provided for purposes of demonstrating performance, rather it is presented to describe the methodology of the strategy. Thus the results of the single transaction should not be taken as representative of what other transactions produced which could be materially worse than that shown by the single transaction. Investment advice should be tailored to a client s particular situation and goals and you shouldn t base your investment decisions on a single graph or presentation. Thus, you should speak with a Partnervest investment advisory representative concerning your particular situation. Investment management services provided through Partnervest Advisory Services LLC. 22