Equity Rotation SMA (Economic Cycle Positioning)

Set by the Portfolio Manager

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Manager Portfolios

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0.25%-0.75% annual; IA retains 0.25%, remainder paid to the Portfolio Manager; fee negotiated between IA and the manager

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Equity securities (exchange-listed, certain OTC, ADRs) and ETFs; Portfolio Managers cannot use leverage/margin

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Most $500-$50,000; majority $10,000 and below

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To be selected, managers are screened (e.g. AUM, own money in the strategy), fill in a questionnaire on portfolio construction, risk control and strategy guidelines, share historical trade data, and pass a live test period during which clients cannot invest. Managers license their trade data and have no discretion over client accounts. IA receives no compensation from managers and does not pay them for referrals.

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Risk score 1-5 assigned by IA; reevaluated at least annually

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Not available (TLH only for the Asset Allocation Portfolio)

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Split Rock Private Trading and Wealth Management LLC (“Split Rock”) strategically manages its Equity Rotation SMA by continually monitoring which phase of the economic cycle we are currently in. Split Rock then invests in companies that it believes are best positioned within the current cycle. On an ongoing basis, Split Rock makes tactical adjustments based on geopolitical events and various micro and macro-economic factors.

Split Rock Private Trading & Wealth Management is a registered investment adviser based in Minneapolis. Split Rock provides access to several specialized investment portfolios. They currently operate and manage an Equity Rotation portfolio that strives to identify and understand economic and business cycle conditions and allocate funds accordingly. Split Rock also manages a North American Shale Energy portfolio that seeks to invest into the Bakken and other various major U.S. Shale plays. It invests funds according to each individual company’s strength of position and growth potential within those shale deposits.

Aggressive capital growth with significantly higher risk than broad equity market. Investing in equities and concentrated portfolios and prepared to take substantial risk to achieve investment goals.

Our Allocation Discipline revolves around two basic principles: Number of Holdings = Typically no more than 50 Individual Holding Weightings = Typically minimum 2%, Maximum 15%. The portfolio has a mix of ETFs and Stocks. Rebalancing techniques are based on either tactical or performance related-adjustments (through Sell Limit or Stop Orders). Following trades, proceeds are used to rebalance existing holdings, held in cash for future buying opportunities, or used to enter new positions.

Split Rock Private Trading & Wealth Management strategically manages its Equity Rotation SMA by continually monitoring which phase of the economic cycle we are currently in. Economic cycles are divided into 4 separate phases: early cycle, mid cycle, late cycle, and recession. Based on which cycle we deem the economy to be in, we make judgments about whether some sectors may stand to benefit over others. For example, in a recessionary phase, defensive stocks such as consumer staples tend to outperform the wider market. Even during periods of high unemployment and economic recession, people still need consumer staple companies to provide them with food, beverages, toilet paper, soap, etc. Inversely, in an early cycle recovery, consumer discretionary stocks tend to outperform. For example, as unemployment falls, more people have money to spend on discretionary items such as new TVs, cars, etc. Our strategy is driven primarily by fundamental analysis. We tend to favor companies with consistent growth and stability of earnings and dividends, limited debt, low P/E multiples relative to peers, and strong cash flows. We supplement our research with technical analysis, focusing on moving averages and support levels, as well as identifying current and potential industry trends.

Our research begins with all publicly traded companies listed on the NYSE, Nasdaq, and AMEX. We then identify sectors that in our view may stand to benefit from the economic phase we believe we are currently in or evolving into. We then screen the stocks within the identified sectors using fundamental and technical analysis. We conclude by cross checking our internal research with other well-respected analyst recommendations before we make our final selections.

Our sell discipline is based on many factors including but not limited to: 1. Strategic and tactical adjustments as discussed earlier. 2. Using trailing limit orders to help protect gains or minimize losses. 3. Ongoing fundamental and technical analysis.