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1 Tactical Long/Short Strategy

2 Tactical Long/Short Strategy INVESTMENT OBJECTIVE: To produce capital appreciation in any market environment, while exhibiting less downside volatility than the S&P 500. INVESTMENT APPROACH: The strategy uses technical trading indicators as well as fundamental analysis to actively trade the SPDR S&P 500 (SPY) and the ProShares Short S&P 500 (SH). During periods when a trade signal does not indicate a trend in either direction, the strategy will invest in cash. The strategy can invest in any combination of SPY, SH, and cash. The investment philosophy behind the strategy is that one of the best ways to make money is to lose less in market downturns. The strategy is appropriate for investors who are looking to sidestep market downturns while still participating in the upside. 2

3 Strategy Strengths Can provide downside protection and generate alpha in market downturns. Tactical approach to opportunistically capture return in any market environment. Flexibility to be long, short, neutral, or a combination based on market conditions. Takes a neutral position when no opportunity is signaled or data are mixed. Fundamental macro overlay on top of a quantitative algorithmic model. 3

4 Downside Protection One of the best ways to make money is to avoid losses and drawdowns. For every 50% loss, an investor would need to make a 100% gain just to break even. Therefore, it is extremely important to have downside protection in one s portfolio in order to preserve wealth, which this strategy provides. Percentage Loss Percent Rise To Breakeven 10% 11% 15% 18% 20% 25% 25% 33% 30% 43% 35% 54% 40% 67% 45% 82% 50% 100% Not only does Tactical Long/Short provide downside protection during market pullbacks, it can generate positive returns in a negative market since it invests in the inverse of the S&P 500 during downturns. 4

5 Portfolio Construction Construction of the portfolio began with the need to address the trending nature of the markets and determine a way to hedge downside risk without maintaining a long/short ratio that could limit the potential upside. The best way was to determine a mechanism that attempts to predict a balance between long and short term trends in the market. Historical data indicated a negative correlation between the SPY and the VIX Index, which is essentially a one-month fear gauge for the broad S&P 500 Index. The strategy either invests in SPY, SH, cash or a combination. Proprietary algorithm triggers signals based on dynamic moving averages of the VIX to go from long (SPY) to short (SH). Trading frequency depends on market volatility. Given that the strategy only holds SPY/SH it can be liquidated at any given moment during market trading hours with no liquidity issues or timing limitations. New capital is invested in SPY, SH, and/or cash based upon market conditions. 5

6 SPY vs. VIX SPY VIX 6

7 Fundamental Analysis The strategy uses both technical/quantitative factors as well as fundamental analysis to make investment decisions to stay long or short the market. Sometimes the VIX is spiked by factors outside of U.S. fundamentals and S&P 500 earnings data, such as commodity price changes and overseas news. In these cases the VIX is not a direct reflection of volatility due to S&P 500 fundamentals and we have to evaluate whether or not to abide by the model s signals. The algorithm has a management decision layer that places macro analysis on top of the algorithm to recognize the underlying factors that cause the VIX to cross our proprietary dynamic moving average and how many sectors within the S&P 500 are impacted as the VIX goes up in order to determine whether the portfolio should remain long or go short. Based on what factors cause the VIX to cross the dynamic moving average, there are fundamental factors that determine whether we follow the signal or deviate (based on whether the volatility is domestically driven/tied to S&P 500 stocks or caused by other factors). The following two slides show two examples of when having a management decision overlay on top of the model generated alpha for the strategy. 7

8 FXCM Date SPY Adj Close Holding Signal Friday, January 16, LONG Tuesday, January 20, SHORT 0.21% Wednesday, January 21, LONG 0.50% Follow Model SPY Adj Close Manager Decision Alpha /16 close LONG BUY to /20 close LONG Return -0.21% 0.21% 0.43% In January of 2015, FXCM, the largest U.S. retail foreign-exchange broker at the time, almost collapsed when the Swiss franc surged, spiking the VIX which triggered our algorithm to short on Friday, January 16 th. Had we followed the signal, we would have shorted at The model then signaled to return to long January 20 th, which meant we would have bought back at , resulting in a negative return over this time period of -0.21%. Instead, we used our fundamental overlay to override the signal which resulted in a net positive of 0.21% and an alpha of 0.43% over the model. In this case, the VIX increased due to fears over FXCM and its effects on currencies, not U.S. economic fundamentals or S&P 500 company earnings. The market quickly realized the containment of this effect and recovered shortly thereafter. By using our management decision layer on top of the model, our fundamental analysis generated an alpha of 0.43% for the strategy. 8

9 Chinese Stock Market Crash Date SPY Adj Close Holding Signal Thursday, August 20, LONG Friday, August 21, LONG -3.13% Monday, August 24, SHORT 4.09% Tuesday, August 25, SHORT 1.22% Wednesday, August 26, SHORT -3.98% Thursday, August 27, SHORT -2.30% Friday, August 28, 2015 LONG Follow Model Date Manager Decision Alpha /21/15 close LONG BUY to /27/15 close LONG Return -0.77% 0.77% 1.55% From Monday, August 17 th to Friday, August 21 st, S&P 500 slipped 6.26% and our model signaled for us to go short Friday morning. Had we followed the signal, we would have shorted at The model then signaled to return to long August 27 th, which meant we would have bought back at , resulting in a negative return over this time period of -0.77%. Instead, we used our fundamental overlay to override the signal which resulted in a net positive of 0.77% and an alpha of 1.55% over the model. In this case, the selloff was mostly attributed to the Chinese selloff and commodities price drop. However, U.S. fundamentals were still solid and since revenue from utilities, consumer staples, and healthcare companies is generated mostly from domestic sources, they would not be heavily impacted by the Chinese growth slowdown and may even benefit from the commodity price drop. Consumer staples would benefit from a lower import price due to the devaluation of the yuan. Transportation would also benefit from lower oil prices. Since the U.S. selloff was primarily fear and panic driven, not based on actual fundamentals or U.S. earnings and economic data, the pullback proved to be temporary and our management decision generated an alpha of 1.55% for the strategy. 9

10 Growth of Investment $9,000 GROWTH OF A $1,000 INVESTMENT (NET OF FEES) $8,000 $7,000 $6,000 $5,000 Tactical L/S SPY $4,000 $3,000 $2,000 $1,000 $0 Dec '06 Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Investing $1,000 in Tactical Long/Short since December of 2006 would yield $7,693 net of fees as of October 30, 2015 vs. the SPY at $1,760. The strategy avoided the bear markets of and 2011, and also generated positive returns by investing in the inverse SH during this time. 10

11 Annual Returns 130% 110% ANNUAL RETURNS (NET OF FEES) 90% 70% Tactical L/S SPY 50% 30% 10% -10% -30% -50% Tactical Long/Short not only avoided the downturn in 2008 at the height of the financial crisis, but it significantly outperformed the market by going into the inverse of SPY (invested in SH). 11

12 Performance Returns YTD Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Tactical L/S SPY % 5.34% -1.49% 0.68% 1.23% -1.92% 1.85% -5.82% -5.60% 6.63% -2.94% 2.61% % 4.32% 0.79% 0.66% 1.93% 1.96% -1.33% 3.74% -1.31% -1.54% 2.61% -0.24% 8.24% 13.46% % 1.21% 3.61% 1.83% 2.24% -1.79% 4.48% -2.85% 2.53% 4.40% 2.82% 2.45% 27.24% 32.31% % 4.12% 3.06% -0.63% -5.71% 1.48% 1.12% 2.38% 2.41% -1.73% 0.54% 0.85% 12.54% 15.99% % 3.30% -2.50% 2.74% -1.06% -7.47% -2.51% 5.53% 5.30% 5.09% -2.43% 5.23% 13.19% 1.89% % 2.49% 5.79% 1.47% 7.16% -5.07% 5.94% -0.30% -0.79% 3.62% 0.00% 6.36% 25.14% 15.06% % 12.89% 5.00% 9.43% 5.56% 3.81% 9.20% 3.51% 3.36% -1.83% 5.86% 1.81% 54.60% 26.35% % -1.34% 3.37% 2.66% 1.43% -7.93% 13.17% 1.47% 16.12% 18.80% 12.21% 6.36% % % % -1.86% 1.10% 4.21% 3.22% -1.39% 0.32% 7.60% 4.00% 1.60% -3.19% -4.35% 12.25% 5.15% Tactical Long/Short has performed in line with the S&P 500 during bull and flat markets and has significantly outperformed in bear markets. 12

13 Tactical Long/Short Strategy Sector Allocation Portfolio Composition Cash, 5.0% Cash 5.0% Large Blend 95.0% Large Blend, 95.0% Statistics Standard Deviation (Monthly): 4.77% October 6.63% Standard Deviation (Annualized): 16.54% YTD:* -2.94% Downside Deviation (Monthly):** 2.29% Average Monthly: 2.05% Downside Deviation (Annualized):** 7.92% Highest Month: 18.80% Sharpe Ratio (Monthly):** 0.38 Lowest Month: % Sharpe Ratio (Annualized):** 1.31 % of Positive Months: 68.87% Sortino Ratio (Monthly):** 0.74 Maximum Drawdown: % Sortino Ratio (Annualized):** 2.56 Longest Winning Streak: 8 Months Alpha (Monthly):*** 2.00% Longest Losing Streak: 3 Months Alpha (Annualized):*** 26.78% Beta:*** 0.12 Compounded Monthly Return: 1.94% Correlation Coefficient:*** 0.12 Compounded Annual Return: 25.98% R-squared:*** 0.01 Cumulative Return: % *YTD Through October 2015 **Based on RFR at 3.0% ***Calculated Against S&P

14 Fees Elite s direct individual clients are charged 1% management fee only with no performance fee. White or private labeling fees are as follow: 1: Adhesion and Envestnet/Placemark Elite s fee schedule for White Labeled services where independent third party investment managers utilize intermediaries responsible for trading and allocations: Up to $100M = 0.30% 0.35% Annually Over $100M = Breakpoints Negotiable 2: Interactive Brokers (IB) Elite s fee schedule for White Labeled services where independent third party investment managers utilize Elite s investment platform/infrastructure through IB and Elite is responsible for trading and allocations: Up to $100M = 0.60% Annually Next $50M = 0.55% Annually Anything over $150M = 0.50% Annually 3: Strategy Licensing Agreement We provide trade signals to the RIA Up to $100M = 0.40% Annually Next $50M = 0.35% Annually Anything over $150M = 0.30% Annually 14

15 Investment Team Fariba Ronnasi - Ms. Fariba Ronnasi, president and founder of Elite Wealth Management, Inc. has headed the strategic management of numerous high net worth individuals. Prior to establishing the firm in October of 2004, Fariba worked as Managing Director for the Private Wealth Division of Columbia Management Company and was responsible for expanding the Private Portfolios Group on the West Coast. Previously, Fariba was a Business Development Manager for Citicorp in its Private Banking Division. Prior to joining Citicorp, she worked as the Senior Private Banking Manager at Keycorp and established the Technology group for the Private Bank. She has 23 years of solid experience in the field of finance and investment management. Ms. Ronnasi has a BA and MBA in Finance with a minor in Economics from Seattle University and currently holds a Series 65 license. Yinmo Wang - Yinmo Wang conducts financial analysis on the firm s trading strategies. He wrote the trading algorithm for several of the firm s strategies and implements their trading schema, including the continued evaluation of their efficacy. Mr. Wang previously designed in-house funds for clients and evaluated performance reporting for Financial Concepts Unlimited and prior to that, performed finance and accounting functions in support of the CFO at Systems Plus. Mr. Wang received a B.S. in International Finance from Fudan University in Shanghai; an MBA from Montreux Switzerland; a M.S. Finance (MSF) and a M.S. Engineering Management (MSEM) and Systems Engineering (MSSE) from the George Washington University. Yinmo Wang has over 20 years of experience in the industry and is a CFA charterholder. Kevin Lennil - Kevin Lennil manages several portfolios for the firm and has 10+ years of experience in the investment industry and high volume trading in the options market. He managed his own RIA firm, Exagroup, from before the firm was purchased by Elite Wealth Management and subsequently joined the Elite team in 2014 as a full time employee. Mr. Lennil developed the algorithm for the Tactical Long/Short strategy and currently holds a Series 65 license. 15

16 Disclosures Elite Wealth Management, LLC ( Elite Wealth Management ) is a registered investment adviser with the Securities and Exchange Commission. The firm is defined as Elite Wealth Management and includes assets managed as dual officers. Assets under management include assets managed by Elite Wealth Management officers as dual officers of Lattice Capital Management. Any client and account statistics presented include dual officer relationships. This material (or any portion thereof) may not be copied or distributed without Elite Wealth Management s prior written approval. Statements are current as of the date of the material only. The performance shown is for the stated time period only; due to market volatility, each account s performance may be different. Returns are shown net of management fees, trading costs, and other direct expenses, but before custody charges, withholding taxes, and other indirect expenses. The returns shown assume the reinvestment of dividends and other income. In the case of projected performance and cash flows, it is presented in response to client s request. Performance is expressed in U.S. dollars unless noted otherwise. Performance results for one year and less are not annualized. Past results are not necessarily indicative of future performance and are no guarantee that losses will not occur in the future. Future returns are not guaranteed and a loss of principal may occur. The standard deviations and information ratios may be higher or lower at any time. There is no guarantee that these measurements will be achieved. These results are based on model or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. This presentation does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. The information provided in this presentation should not be considered a recommendation to purchase or sell a particular security. Any specific securities identified do not represent all of the securities purchased, sold or recommended for advisory clients, and may be only a small percentage of the entire portfolio and may not remain in the portfolio at the time you receive this report. You should not assume that investment decisions we make in the future will be profitable or will equal the investment performance of the past. The following provides a simplified example of the cumulative effect of management fees on investment performance: An annual management fee of 0.80% applied over a five-year period to a $100 million portfolio with an annualized gross return of 10% would reduce the value of the portfolio from $161,051,000 to $154,783,041. The actual management fee that applies to a client s portfolio will vary and performance fees may be available. The standard fee schedules for Elite Wealth Management s strategies are shown in Part II of Elite Wealth Management s Form ADV. Please note that this presentation does not comply with all of the disclosure requirements for an ERISA section 404(c) plan, as described in the Department of Labor regulations under section 404(c). Plan sponsors intending to comply with those regulations will need to provide the plan participants with additional information. The information provided in this presentation does not constitute individual investment advice for a participant or investor, is only informational in nature and should not be used by a participant or investor as a primary basis for making an investment decision. 16

17 Disclosures The performance shown is compared to several indexes shown herein. Broad-based securities indices are unmanaged and are not subject to fees and expenses typically associated with managed accounts or investment funds. The number and types of securities found in the index can differ greatly from that of the accounts held in the strategy shown. Investments cannot be made directly in an index. Standard & Poor s, S&P, S&P 500 Index, Standard & Poor s 500, and S&P Mid Cap 400 Index are trademarks of McGraw-Hill, Inc., and have been licensed for use by Elite Wealth Management. The Products mentioned are not sponsored, endorsed, sold, or promoted by Standard & Poor s, and Standard & Poor s makes no representation regarding the advisability of investing in the Products. Most of the performance presented in this presentation occurred prior to inception of the option strategy now being managed by Lattice Capital Management and the portability of this track record was lifted out of previous accounts managed in a substantially similar manner by prior Firm(s). The performance for the period September 2011 through January 2014 was achieved while Mr. Lennil was the Chief Investment Officer ( CIO ) with his prior firm, Exagroup, Inc. ( Exagroup ). While Mr. Lennil, was not affiliated with Lattice Wealth Management or Lattice Capital Management during that time period, the accounts that comprise the performance of the DOS Composite were all managed on behalf of clients of Elite Wealth Management or Lattice Capital Management. The performance achieved for the period January 2014 to present was achieved while Mr. Lennil was affiliated with Lattice Capital Management, as he continues to make all investment decisions for all client accounts managed with Lattice as he did while employed at Exagroup. Lattice Capital Management LLC ( Lattice ) is a registered investment adviser with the Securities and Exchange Commission. We have provided this information regarding your account(s) based on sources we believe to be accurate. To ensure accuracy, you are encouraged to compare account information detailed on this statement with the information contained on the statement from the corresponding time period from the custodian of your account. Please contact us or the account custodian with any questions you may have. Also, please notify us promptly if you do not receive statements on all accounts from the custodian on at least a quarterly basis. This material (or any portion thereof) may not be copied or distributed without Lattice s prior written approval. Statements are current as of the date of the material only. This presentation does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. The information provided in this presentation should not be considered a recommendation to purchase or sell a particular security. The standard fee schedules for Lattice s strategies are shown in the firm s Form ADV Part 2. Lattice and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with Lattice of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. The performance shown is for the stated time period only; due to market volatility, each account s performance may be different. Returns are shown net of a 1% management fees, 15% performance fee, trading costs, and other direct expenses, but before custody charges, withholding taxes, and other indirect expenses. The returns shown assume the reinvestment of dividends and other income. In the case of projected performance and cash flows, it is presented in response to client s request. Performance is expressed in U.S. dollars unless noted otherwise. Performance results for one year and less are not annualized. Past results are not necessarily indicative of future performance and are no guarantee that losses will not occur in the future. principal may occur. There is no guarantee that these measurements will be achieved. Future returns are not guaranteed and a loss of This presentation does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. The information provided in this presentation should not be considered a recommendation to purchase or sell a particular security. Any specific securities identified do not represent all of the securities purchased, sold or recommended for advisory clients, and may be only a small percentage of the entire portfolio and may not remain in the portfolio at the time you receive this report. You should not assume that investment decisions we make in the future will be profitable or will equal the investment performance of the past. 17