what role does fixed income play in your...

2

What Role Does Fixed Income Play in Your Portfolio?

￭  Each asset class in which you invest should have a specific purpose in your overall investment strategy ￭  Safety – Most investors consider fixed income their “safe money”. They consider stocks their

“risky money”. ￭  Treasury securities are backed by the full faith and credit of the United States government. ￭  Treasuries have had 3 down years since 1973, with the worst being -3.6%

￭  Diversification – Investors want fixed income to offset the volatility of the stock market. ￭  Treasuries have a very low correlation with stocks – 0.05 ￭  Treasuries have a negative correlation with stocks when stocks are down. Diversification

when you need/want it the most.

￭  Return – Investors want to earn a return on their fixed income portfolio that will enable them to maintain their purchasing power. ￭  Treasuries have offered a return that is competitive with riskier fixed income securities.

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Diversification When You Need it the Most

Active Treasury

Management

Active Treasury

Management Long/Short

Barclays Capital U.S.

Treasury Index*

Barclays Capital

Corporate Investment

Grade Index*

Barclays Capital U.S. Corporate High Yield

Index* S&P500*

-0.180 -0.131 -0.143 0.153

0.501

28.0 Year Return Correlations-Down Markets

Active Treasury

Management

Active Treasury

Management Long/Short


Treasury Index*

Barclays Capital

Corporate Investment

Grade Index*

Barclays Capital U.S. Corporate High Yield

Index* S&P500*

0.028 0.005 0.047 0.305

0.566

28.0 Year Return Correlations

The AIFS ATM and ATM Long/Short strategy returns correlation figures set forth above are hypothetical or simulated prior to May 1, 2009. and July 1, 2009, respectively. As such, such figures do not represent actual trading, are not necessarily indicative of future results, have certain limitations and may not reflect the impact that material economic and market factors might have had on AIFS’ investment results if AIFS were actually managing clients’ money. For example, such results may have under- or over-compensated for the impact, if any, of material economic and market factors, such as lack of liquidity.

*The Barclays Capital US Treasury Index, Corporate Investment Grade Index, and Corporate High Yield Index are unmanaged. The indices are not available for investment, and unlike the Active Treasury Management and Active Treasury Management Long/Short strategies, do not incur expenses. Index returns are from Barclays Capital Website. Correlation data are from AIFS.

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Treasuries - A Competitive Fixed Income Performance Benchmark

￭  Investors not justly rewarded for taking the credit risk associated with corporate bonds.

Source: Barclays Capital Website.

Treasuries vs. Government CreditJan 1, 1973 - June 30, 2011

Barclays Capital U.S. Treasury Index,

7.92%

Barclays Captial Government/Credit

Index, 7.88%7.0%

7.4%

7.8%

8.2%

8.6%

9.0%

Treasuries vs. AggregateJan 1, 1976 - June 30, 2011

Barclays Capital U.S. Treasury Index, 8.07%

Barclays Captial Aggregate Bond

Index, 8.24%7.0%

7.4%

7.8%

8.2%

8.6%

9.0%

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Bonds May Merit a Greater Role ￭  Treasury securities have offered a competitive return over long time periods, with less volatility

Source: S&P returns from Bloomberg & Barclays Index returns from Barclays Capital Website

Stocks vs. Bonds - Total Returnfor Periods ending June 30, 2011

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%

1 Year 3 Years 5 Years 10 Years 20 Years 30 Years 38.5 Years

Barclays Capital U.S. Treasury Index S&P500

S&P 500

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

Barclays Capital U.S. Treasury Index

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

6 6

Two Strategies Based on the Interest Rate Forecast

SCORECARD SIGNAL– PORTFOLIO TARGET DURATION*

Higher Rates Indeterminate Lower Rates

Fully Bearish Moderately Bearish Neutral Moderately

Bullish Fully Bullish

0 Years 2.75 years 5.5 years 8.25 years 11 Years

Based on the Scorecard, we determine the interest rate outlook then position the portfolio in terms of exposure to the performance benchmark, The Barclays Capital U.S. Treasury Bond Index, along the following scales.

* All Duration Ranges are approximate and would change based on the duration of the benchmark. Accounts can be customized based on client preferences, potentially.

Interest Rate Exposure

Cash Equivalents, U.S. Treasury Bills, Notes and Bonds Securities Utilized:

AIFS Active Treasury Management Strategy

AIFS Active Treasury Management Bull/Bear Strategy

Securities Utilized: Cash Equivalents, U.S. Treasury Bills, Notes and Bonds, Treasury related ETFs

SCORECARD SIGNAL– PORTFOLIO TARGET DURATION*

Higher Rates Indeterminate Lower Rates

Fully Bearish Moderately Bearish Neutral Moderately

Bullish Fully Bullish

-11 Years 2.75 years 5.5 years 8.25 years 11 Years

Interest Rate Exposure

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Active Management Can Make a Meaningful Contribution

Anticipating the direction of interest rates can yield significant benefits over buy-and-hold

All data on this page are net of fees unless otherwise indicated. Involves risk of loss and other risks. Past performance (and hypothetical performance in particular) is no guarantee of future results. There is no guarantee the investment strategies will be successful. Please see the disclosure and a glossary of terms in the back of this presentation. The AIFS ATM and ATM Long/Short strategy performance figures set forth above are hypothetical or simulated prior to May 1, 2009. and July 1, 2009, respectively. As such, such figures do not represent actual trading, are not necessarily indicative of future results, have certain limitations and may not reflect the impact that material economic and market factors might have had on AIFS’ investment results if AIFS were actually managing clients’ money. For example, such results may have under- or over-compensated for the impact, if any, of material economic and market factors, such as lack of liquidity.

The Barclays Capital Indices are unmanaged baskets of securities. The indices are not available for investment, and unlike the ATM and ATM Long/Short strategies, do not incur expenses. Index returns are from Barclays Capital Website.

13.74% 7.86% 8.67% 9.51% 7.32% 0.00%

5.00%

10.00%

15.00%

20.00%

Fixed Income Return Comparison July 1, 1983 - June 30, 2011

ATM

Barclays Capital U.S. Treasury Index

Barclays Capital Corporate Investment Grade Index

Barclays Capital U.S. CorporateHigh Yield Index

Barclays Capital Muni Index

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Interest Rate Forecasting Process

Our quantitative model evaluates and ranks factors in 3 primary categories:

FUNDAMENTAL DRIVERS

Economic Outlook - Based on factors such as labor market conditions, etc.

Inflationary Expectations - Based on factors such as precious metals, prices, etc.

TECHNICAL DRIVERS

Investor Psychology - Level of market reaction not explained by the economic outlook and inflationary expectations

Economic Outlook

Inflationary Expectations

Investor Psychology

Portfolio Construction

Interest Rate Outlook

Combining analysis of economic factors and investor psychology to generate a one month interest rate forecast. We adjust the portfolio to reflect our interest rate outlook.

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We utilize a highly quantitative, proprietary investment model to assess the economy and how it impacts U.S. Treasury rates on a monthly basis.

Our proprietary interest rate forecasting process has been correct about 70% of the time

Active Treasury Management*

Long/Short Active

Treasury Management*


Treasury Index

Annualized Return (1/1/73 – 9/30/81)

10.87%

23.25%

5.23%

Positive Return Months (105 months in period)

78

72

69

9


Months Avg. Rate Change

Rates Up 60 33bps

Rates Down 44 23bps

Treasuries can still add value in a rising rate environment. Active management becomes even more critical

*The AIFS ATM and ATM Long/Short strategy performance figures set forth above are hypothetical or simulated. As such, such figures do not represent actual trading, are not necessarily indicative of future results, have certain limitations and may not reflect the impact that material economic and market factors might have had on AIFS’ investment results if AIFS were actually managing clients’ money. For example, such results may have under- or over-compensated for the impact, if any, of material economic and market factors, such as lack of liquidity. Past performance (and hypothetical performance in particular) is no guarantee of future results. There is no guarantee the investment strategies will be successful. Please see the disclosure and a glossary of terms in the back of this presentation. The Barclays Capital US Treasury Index is an unmanaged basket of securities. The index is not available for investment, and unlike the ATM and ATM Long/Short strategies, does not incur expenses. Index returns are from Barclays Capital Website.

Source: AIFS

Bull/Bear Performance in Rising Rate EnvironmentJan 1, 1973 - September 30, 1981

$0.80

$1.80

$2.80

$3.80

$4.80

$5.80

$6.80

Jan-73

Jul-73 Jan-74

Jul-74 Jan-75

Jul-75 Jan-76

Jul-76 Jan-77

Jul-77 Jan-78

Jul-78 Jan-79

Jul-79 Jan-80

Jul-80 Jan-81

Jul-814.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%

Long/Short 10 Year U.S. Treasury Constant Maturity

Active Treasury Management*

Long/Short Active

Treasury Management*


Treasury Index

Annualized Return (10/1/81 – 6/30/11)

15.09%

18.04%

8.73%

Positive Return Months (357 months in period)

247

246

248

10


Months Avg. Rate Change

Rates Up 161 25bps

Rates Down 190 28bps

Treasuries can add value in a declining rate environment. Active management is critical

*The AIFS ATM and ATM Long/Short strategy performance figures set forth above are hypothetical or simulated. As such, such figures do not represent actual trading, are not necessarily indicative of future results, have certain limitations and may not reflect the impact that material economic and market factors might have had on AIFS’ investment results if AIFS were actually managing clients’ money. For example, such results may have under- or over-compensated for the impact, if any, of material economic and market factors, such as lack of liquidity. Past performance (and hypothetical performance in particular) is no guarantee of future results. There is no guarantee the investment strategies will be successful. Please see the disclosure and a glossary of terms in the back of this presentation. The Barclays Capital US Treasury Index is an unmanaged basket of securities. The index is not available for investment, and unlike the ATM and ATM Long/Short strategies, does not incur expenses. Index returns are from Barclays Capital Website.

Source: AIFS

Bull/Bear Performance in Declining Rate EnvironmentOctober 1, 1981 - June 30, 2011

$0.80$20.80$40.80$60.80$80.80

$100.80$120.80$140.80$160.80

Sep-81Sep-82

Sep-83Sep-84

Sep-85Sep-86

Sep-87Sep-88

Sep-89Sep-90

Sep-91Sep-92

Sep-93Sep-94

Sep-95Sep-96

Sep-97Sep-98

Sep-99Sep-00

Sep-01Sep-02

Sep-03Sep-04

Sep-05Sep-06

Sep-07Sep-08

Sep-09Sep-10

2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%

Long/Short 10 Year U.S. Treasury Constant Maturity

AIFS ATM Strategy 1/1/1973 – 9/30/2011

Barclays Capital U.S. Treasury Bond

Index (does not reflect fees or

expenses; not possible to invest directly in the

index) 1/1/1973 – 9/30/2011

Annualized Returns

AIFS ATM Strategy

As of 9/30/2011




index) As of 9/30/2011

Annualized Net Return 14.18% 8.05% Annualized Std. Deviation 9.01% 5.40% 3rd Quarter* 5.62% 6.48%

Annualized Alpha 6.13% N/A Y-T-D* 4.52% 8.85% Worst Month -6.88% -4.91% 1 Year 4.11% 5.97%

Maximum Drawdown -10.78% -7.43% 3 Years 11.10% 6.52% Worst Year -1.74% -3.56% 5 Years 8.74% 6.78%

Up Capture Ratio 143% N/A 10 Years 9.76% 5.54% Down Capture Ratio 78% N/A Since Inception 14.18% 8.05%

Sharpe Ratio 0.99 0.43 (1/1/1973)

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Portfolio Characteristics & Hypothetical Performance - ATM

AIFS Active Treasury Management SMA Strategy vs. Barclays Capital U.S. Treasury Bond Index - Preliminary as of September 2011

All data on this page are net of fees unless otherwise indicated. Involves risk of loss and other risks. Past performance (and hypothetical performance in particular) is no guarantee of future results. There is no guarantee the investment strategies will be successful. Please see the disclosure and a glossary of terms in the back of this presentation. The AIFS ATM strategy performance figures set forth above are hypothetical or simulated prior to May 1, 2009. As such, such figures do not represent actual trading, are not necessarily indicative of future results, have certain limitations and may not reflect the impact that material economic and market factors might have had on AIFS’ investment results if AIFS were actually managing clients’ money. For example, such results may have under- or over-compensated for the impact, if any, of material economic and market factors, such as lack of liquidity.

The Barclays Capital US Treasury Index is an unmanaged basket of securities. The index is not available for investment, and unlike the ATM and ATM Long/Short strategies, does not incur expenses. Index returns are from Barclays Capital Website.

*Not Annualized

AIFS Bull/Bear Strategy 1/1/1973 – 9/30/2011




index) 1/1/1973 – 9/30/2011

Annualized Returns

1/1/1973 – 9/30/2011

AIFS Bull/Bear Strategy

As of 9/30/2011

Barclays Capital U.S. Treasury Bond Index

(does not reflect fees or expenses; not possible to invest directly in the

index) As of 9/30/2011

Annualized Net Return 19.02% 8.05% Annualized Std. Deviation 11.25% 5.40% 3rd Quarter* -1.34% 6.48%

Annualized Alpha 10.98% N/A Y-T-D* -6.38% 8.85% Worst Month -7.88% -4.91% 1 Year -2.79% 5.97%

Worst Year -5.43% -3.56% 3 Years 11.54% 6.52% Maximum Drawdown -11.96% -7.43% 5 Years 8.67% 6.78%

Up Capture Ratio 127% N/A 10 Years 12.96% 5.54% Down Capture Ratio -92.2% N/A Since Inception 19.02% 8.05%

Sharpe Ratio 1.25 0.43 (1/1/1973)

12 12

Portfolio Characteristics & Hypothetical Performance – Bull/Bear

AIFS Active Treasury Management Bull/Bear SMA Strategy vs. Barclays Capital U.S. Treasury Bond Index - Preliminary as of September 2011

All data on this page are net of fees unless otherwise indicated. Involves risk of loss and other risks. Past performance (and hypothetical performance in particular) is no guarantee of future results. There is no guarantee the investment strategies will be successful. Please see the disclosure and a glossary of terms in the back of this presentation. The AIFS ATM Bull/Bear strategy performance figures set forth above are hypothetical or simulated prior to July 1, 2009. As such, such figures do not represent actual trading, are not necessarily indicative of future results, have certain limitations and may not reflect the impact that material economic and market factors might have had on AIFS’ investment results if AIFS were actually managing clients’ money. For example, such results may have under- or over-compensated for the impact, if any, of material economic and market factors, such as lack of liquidity. The Barclays Capital US Treasury Index is an unmanaged basket of securities. The index is not available for investment, and unlike the ATM and ATM Long/Short strategies, does not incur expenses. Index returns are from Barclays Capital Website.

*Not Annualized

13 13

Portfolio Characteristics & Hypothetical Performance – Blend

Source: AIFS

Efficient Frontier AnalyisATM & Bull/Bear

16.0%

16.5%

17.0%

17.5%

18.0%

18.5%

19.0%

19.5%

6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0%

Volatility

Retu

rn

60% ATM/ 40% Bull/Bear

0% ATM/ 100% Bull/Bear 10% ATM/ 90%

Bull/Bear





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Benefits of Investing

§  Disciplined, value-added strategy in periods of market uncertainty

§  Transparent – know what you own at all times

§  Potential for wealth accumulation in declining interest rate environment

§  Potential for capital preservation in a rising interest rate environment

§  Portfolio diversification

§  Liquidity

§  Readily accommodates smaller accounts

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ATM may be utilized as the core holding for a fixed income allocation

15

￭  Keep your Fixed Income Portfolio as safe as possible…..remember the goal. ￭  Bonds may well deserve to represent a greater portion of an investor’s long term funds. ￭  U.S. Treasuries should represent the lion’s share of an investor’s fixed income allocation.

￭  Primary source of risk is interest rate volatility ￭  Have provided a competitive return ￭  Have provided diversification benefits

￭  Active management of a U.S. Treasuries portfolio has the potential to add significant value. ￭  Being right about direction of interest rates has a meaningful impact. ￭  Addresses the issue of Interest Rate Risk. ￭  Has the potential to make Bonds a contributor to the wealth accumulation process.

Key Takeaways

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Contact Information

New York City

Alex Pileggi American Independence Financial Services 335 Madison Ave, Mezzanine New York, NY 10017 Direct: (646) 843-6901 Main: (866) 410-2006 [email protected] Or Emil Polito American Independence Financial Services 335 Madison Ave, Mezzanine New York, NY 10017 Direct: (646) 843-6906 Main: (866) 410-2006 [email protected]

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17

Glossary of Terms

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§  Alpha – A measure of performance independent of overall market movements, calculated as the excess rate of return relative to a market benchmark.

§  Down Capture Ratio – Sensitivity to a benchmark when the benchmark has negative returns. Less than 100% indicates a manager lost less that the benchmark when the benchmark had negative returns.

§  Maximum Drawdown – The maximum loss experienced from the highest performance point (peak) to the lowest point (valley) during a period of time, as expressed in percent.

§  Sharpe Ratio – A measure of risk-adjusted performance that is calculated by subtracting the average risk-free rate of return from the strategy’s average return, divided by the standard deviation of the strategy’s returns.

§  Standard Deviation – A measure of performance volatility based on the spread of returns in relation to the average return. Investment risk is often measured based on standard deviation.

§  Up Capture Ratio – Sensitivity to a benchmark when the benchmark has positive returns. Greater than 100% indicates a manager earned more than the benchmark when the benchmark had positive returns.

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Risks and Disclosures of an Investment in AIFS’ Active Treasury Management Strategy

￭  The AIFS ATM strategy performance figures set forth are hypothetical or simulated prior to May 1, 2009. As such, such figures do not represent actual trading, are not necessarily indicative of future results, have certain limitations and may not reflect the impact that material economic and market factors might have had on AIFS’ investment results if AIFS were actually managing clients’ money. For example, such results may have under- or over-compensated for the impact, if any, of material economic and market factors, such as lack of liquidity.

￭  In addition, such figures are time-weighted and annualized and include realized and unrealized gains and losses and the reinvestment of interest income. Such figures also reflect the deduction of an annual management fee of 40 basis points (0.40%) and transaction costs estimated to be 20 bps. for sales but not buys. Furthermore, such figures are based upon actual yields at the beginning of each holding period, and assume the notes are at par with a maturity of exactly 10 years.

￭  The AIFS ATM Strategy seeks to maximize total return through a monthly interest rate valuation process (the “Interest Rate Scorecard”). Based upon signals generated by the Interest Rate Scorecard, the duration of the portfolio was as high as 200% and as low as 0% of that of the benchmark, the Barclays Capital U. S. Treasury Bond Index.

￭  No guarantee is made that the AIFS ATM Strategy will be successful; no representation is made that the AIFS ATM Strategy will or is likely to achieve the results set forth above; and investors should be aware that past performance, and simulated performance in particular, is no guarantee of future results. An investment based upon the AIFS ATM Strategy is speculative and involves risk (including the risk associated with interest rate volatility), actual performance may be lower or higher than the performance data quoted, and investors may lose capital. There can be no assurance that the AIFS ATM Strategy will correctly anticipate the behavior of interest rates or that the strategy will be successfully implemented. As a result of recent market activity, current hypothetical results may vary from the figures shown.

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Risks and Disclosures of an Investment in AIFS’ Active Treasury Management Strategy (cont’d)

￭  The Barclays Capital Treasury Bond Index, Barclays Capital U.S. Corporate Investment Grade Index and Barclays Capital High Yield Index returns are from the Barclays Capital website. They are unmanaged indexes, are not investments and do not reflect the deduction of transaction costs. The Treasury index includes Public obligations of the U.S. Treasury of all maturities greater than one year. The Barclays Capital U.S. Corporate Investment Grade Index includes publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. To qualify, bonds must be SEC-registered. The Barclays Capital High Yield Index covers the universe of fixed rate, non-investment grade debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeroes, step-up coupon structures, and 144-As are also included. The S&P 500 is an unmanaged index and does not reflect the deduction of transaction costs. Its returns are from Bloomberg and the Standard & Poor’s website. Correlation data and Bull and Bear market analysis is from AIFS based upon the data from the above referenced sources.

Risks and Disclosures of an Investment in AIFS’ Active Treasury Management Strategy (cont’d)

￭  Performance Disclosure (composite): Results shown after May 1, 2009 are in US dollars and are Net of the maximum Investment Management Fee of 0.40% per annum accrued monthly. The composite includes all fully discretionary, fee-paying accounts utilizing the Active Treasury Management strategy with an inception value greater than $70,000. Accounts are included in the composite on the 1st day of the month after management of the account has begun, including those accounts no longer with the firm. Past performance is not indicative of future results. Results include the reinvestment of all income. Wrap accounts are included in this composite. Gross returns for wrap accounts are stated gross of all fees and transaction costs charged by the respective wrap sponsor, but include transaction costs incurred by the manager. Gross returns for non-wrap accounts are net of transaction costs. The maximum fee charged by American Independence Financial Services (AIFS) for its Active Treasury Management strategy is 0.40% per annum. Fees are generally based on quarterly market values determined by the custodian and may include any combination of management, transaction, custody, and other administrative fees. Wrap fee schedules are provided by independent wrap sponsors and are available upon request from the respective wrap sponsor. Actual investment advisory fees incurred by clients may vary. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. To receive a complete list and description of AIFS’ composites and/or a presentation, contact Glenn Dorsey at 646-843-6907, or write American Independence Financial Services, 335 Madison Avenue, Mezzanine, New York, NY 10017, or [email protected].

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21

Risks and Disclosures of an Investment in AIFS’ Active Treasury Management Bull/Bear Strategy

￭  The AIFS ATM Bull/Bear strategy performance figures set forth are hypothetical or simulated prior to July 1, 2009. As such, such figures do not represent actual trading, are not necessarily indicative of future results, have certain limitations and may not reflect the impact that material economic and market factors might have had on AIFS’ investment results if AIFS were actually managing clients’ money. For example, such results may have under- or over-compensated for the impact, if any, of material economic and market factors, such as lack of liquidity.

￭  In general, simulated investment strategies are also subject to the fact that they are designed with the benefit of hindsight. In addition, such figures are time-weighted and annualized and include realized and unrealized gains and losses and the reinvestment of interest income. Such figures also reflect the deduction of an annual management fee of 50 basis points (0.50%) and transaction costs estimated to be 20 bps. for sales but not buys. The performance numbers shown impose an annual cost of 50 bps. for the short position. The performance numbers shown impose an annual cost of 50 bps. for the short position based on the management fee for the short ETF at 95 bps. per year and the average monthly tracking error of the ETF.

￭  The AIFS ATM Bull/Bear strategy seeks to maximize total return through a monthly interest rate valuation process (the “Interest Rate Scorecard”). Based upon signals generated by the Interest Rate Scorecard, the duration of the portfolio was as high as 200% and as low as -200% of that of the benchmark, the Barclays Capital U. S. Treasury Bond Index.

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Risks and Disclosures of an Investment in AIFS’ Active Treasury Management Bull/Bear Strategy (cont’d)

§  No guarantee is made that the AIFS ATM Bull/Bear Strategy will be successful; no representation is made that the AIFS ATM Bull/Bear strategy will or is likely to achieve the results set forth above; and investors should be aware that past performance, and simulated performance in particular, is no guarantee of future results. An investment based upon the AIFS ATM Bull/Bear strategy is speculative and involves risk (including the risk associated with interest rate volatility), actual performance may be lower or higher than the performance data quoted, and investors may lose capital. There can be no assurance that the AIFS ATM Bull/Bear strategy will correctly anticipate the behavior of interest rates or that the strategy will be successfully implemented. As a result of recent market activity, current hypothetical results may vary from the figures shown.

§  The Barclays Capital U. S. Treasury Bond Index is an unmanaged index which includes public obligations of the U.S. Treasury of all maturities greater than one year, is not an investment and does not reflect the deduction of transaction costs.


￭  Performance Disclosure (composite): Results shown after July 1, 2009 are in US dollars and are Net of the maximum Investment Management Fee of 0.50% per annum accrued monthly. The composite includes all fully discretionary, fee-paying accounts utilizing the Active Treasury Management Long/Short strategy with an inception value greater than $70,000. Accounts are included in the composite on the 1st day of the month after management of the account has begun, including those accounts no longer with the firm. Past performance is not indicative of future results. Results include the reinvestment of all income. Wrap accounts are included in this composite. Gross returns for wrap accounts are stated gross of all fees and transaction costs charged by the respective wrap sponsor, but include transaction costs incurred by the manager. Gross returns for non-wrap accounts are net of transaction costs. The maximum fee charged by American Independence Financial Services (AIFS) for its Active Treasury Management Long/Short is 0.50% per annum. Fees are generally based on quarterly market values determined by the custodian and may include any combination of management, transaction, custody, and other administrative fees. Wrap fee schedules are provided by independent wrap sponsors and are available upon request from the respective wrap sponsor. Actual investment advisory fees incurred by clients may vary. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. To receive a complete list and description of AIFS’ composites and/or a presentation, contact Glenn Dorsey at 646-843-6907, or write American Independence Financial Services, 335 Madison Avenue, Mezzanine, New York, NY 10017, or [email protected].

23


§  Exchange Traded Funds (“ETFs”) Risks. The following are various types of risks to which the strategy is subject based the certain types of ETFs in which the strategy will be investing:

￭  General ETF Risk. The cost to an investor of investing in the strategy may be higher than the cost of investing

directly in ETF shares and may be higher than other strategies that invest directly in equities. You will indirectly bear fees and expenses charged by the ETFs in addition to the strategy’s direct fees and expenses.

￭  Swap or Counter Party Risk. The inverse ETFs employed in the strategy utilize swaps and may entail certain risks,

including, in some or all cases, aggressive investment techniques (futures contracts, options, forward contracts, swap agreements and similar instruments), correlation or inverse correlation, leverage and market price variance, all of which can increase volatility and decrease performance. The ETFs are non-diversified and may be more susceptible to single issuer risk than a more diversified strategy. Tracking Error Risk. There is no assurance the ETFs the strategy may utilize will achieve their objectives. Additionally, since many ETFs are managed to reflect daily price change objectives, there will be a compounding effect if the ETFs are held for longer than one day.

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￭  Leveraging Risks Leverage involves special risks. There is no assurance that a strategy will leverage its portfolio or, if it does, that a strategy’s leveraging strategy will be successful. The strategy may be more volatile than if the strategy had not been leveraged because the leverage tends to exaggerate any effect of the increase or decrease in the value of the strategy’s portfolio securities. The strategy cannot assure you that the use of leverage will result in a higher return on your investment, and using leverage could result in a net loss on your investment.

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26 26

Appendix

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T. Kirkham ‘Kirk’ Barneby Mr. Barneby joined AIFS in 2008 as Chief Strategist & Portfolio Manager, Taxable Fixed Income. At AIFS he utilizes a proprietary discipline, grounded in the economic theory of interest rate behavior, to manage interest rate exposure or risk. Prior to AIFS Mr. Barneby was a Managing Member of Old Iron Hill Capital Management, LLC employing quantitatively-oriented fixed income and multi-strategy investment approaches. Previously, he headed an investment group at UBS in New York that managed equity and bond portfolios with roughly $7 billion in assets. Earlier, in the 1980s, Mr. Barneby was part of a team at Continental Can that made asset allocation decisions for the company’s pension plan. He began his career in the Economics Department at First National City Bank (Citibank).

Glenn Dorsey Mr. Dorsey joined AIFS in January 2009 as Portfolio Manager and is responsible for the day-to-day management and trading of the Active Treasury Management and Active Treasury Management Long/Short strategies, as well as the fixed income portion of the AIFS NestEgg Fund family. He co-manages, along with Mr. Barneby, the Tactical Fixed Income discipline and the Interest Rate Scorecard. Prior to joining AIFS, Mr. Dorsey was the founder of Reveille Asset Mgt. Prior to starting Reveille, Mr. Dorsey was a portfolio manager with Jamison Prince Asset Mgt, Lyon Stubbs & Tompkins, Mitchell Hutchins and Bankers Trust Company. Mr. Dorsey has been in the financial services industry for 26 years and is a Chartered Financial Analyst.

Emil Polito Mr. Polito joined AIFS in 2008 and is responsible for business development and operations. Prior to joining AIFS, Mr. Polito was Director of Citibank’s Investment Advisory Services and was responsible for front, middle and back office operations for money managers in retail and institutional outsourcing. Mr. Polito started his career with PaineWebber in 1978 and rose to the position of Executive Director at successor firm UBS Global Asset Management, where he was a member of the firm’s operating committee and a Vice President and Board Member of the firm’s mutual funds. Mr. Polito was nominated to attend the SIA’s Future Business Leaders at the University of Pennsylvania Wharton School of Business where he completed a 3 year program in 1997.

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Key Personnel

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