1. Certified General Accountant’s Association of Barbados Annual Conference Wealth Creation James A. Lavorgna, J.D., LL.M, CFP Distinguished Fellow - Royal Society of Fellows Business Services International, Inc.

2. 2 Introduction The Royal Society of Fellows (RSOF) is the premier professional cross-disciplinary society structured as a global think-tank, that educates, trains and certifies professionals in international tax, compliance, anti-money laundering and corporate and computer security. A distinguished specialist faculty of academics and practitioners provide its membership opportunities for networking, practical instruction, education, training and intelligence on cross-border tax planning, financial and estate planning and compliance for individuals and companies.

3. 3 The RSOF: Provides professional and social networking events. Establishes professional ethical and quality standards through academically accredited professional development programs Provides a forum for recognition of an individual’s level of quality contribution to his profession and academia.

4. 4 What type of membership is available in the RSOF? The RSOF recognizes the following levels of membership: RSOF Member; Associate Fellow; Fellow; and Distinguished Fellow. Distinguished Fellow What are the annual dues to become an RSOF member? Currently the annual dues are $200.00.

5. 5 Annual Conferences The Society hosts conferences that provide education, resources and networking opportunities through both formal and social interaction. Many friendships and alliances occur at these conferences. The conferences have been held in the following destinations: First Annual Global Conference - Nassau Bahamas First Annual Global Conference - Nassau Bahamas Second Annual Global Conference - Miami, Florida Second Annual Global Conference - Miami, Florida Third Annual Global Conference - Cayman Islands Third Annual Global Conference - Cayman Islands Fourth Annual Global Conference - Miami, Florida Fourth Annual Global Conference - Miami, Florida Geneva Summit (9th & 10th December 2004, Geneva) Geneva Summit (9th & 10th December 2004, Geneva)

6. 6 Proposed Destinations Miami, FLNovember 2005 AnguillaMay 2006 BVINovember 2006 BarbadosMay 2007 ?

7. 7 Law Review The Society hosts a law review, issued through Lexis-Nexis and Westlaw, as well as to the members electronically, twice a year. The law review is the only non-law school member of the National Conference of Law Reviews (NCLR), and presents high quality, footnoted academic and professional papers.law review

8. 8 Education And Training The Society has partnered with accredited academic institutions to provide its members a Diploma program and Advanced Certification with high quality interactive education and training in the fields of International Taxation Anti-Money Laundering & Compliance Trusts and Administration Companies and Administration International Estate Planning U.S. Taxation E-Commerce

9. 9 Recognized Designations The RSOF and the American Academy of Financial Management have partnered to confer joint designations for: Chartered Wealth Manager – International Tax Chartered Trust and Estate Planner-Global Estate Planning Certified Compliance Analyst – Anti-money Laundering In-house Executive Training Classes are held for groups of 10 or more. Designations are recognized world-wide and by the National Association of Securities Dealers in the United States.

10. 10 Master Financial Professional RSOF/AAFM accepts graduates of university Finance Programs on a case-by-case basis for the MFP Designation. When a University is state sponsored and recognized, we usually recognize the business school, etc. Thus, Graduates from University of West Indies with a degree in finance, tax, economics, or accounting and another advanced degree, and 5 years professional experience would be eligible for the MFP (no additional courses would be necessary). RSOF membership and AAFM certification fee required. In addition, holders of this designation would receive credit towards the CWM and CTEP designations and would qualify for a 25% tuition deduction.

11. 11 Master of Laws Program The Society's academic partner, St. Thomas University School of Law in Miami, Florida provides an ABA approved, on-line LL.M Master of Laws in International Taxation with concentrations in Offshore Financial Centers, Global Estate Planning, U.S. Taxation, and E- commerce to lawyers and non-lawyers. The Society has also developed an accredited J.S.D. (doctoral) program in the above fields.

12. 12 U.S. Patriot Act The Patriot Act - Title III : “The International Money Laundering Abatement And Financial Anti-Terrorism Act of 2001” Grants sweeping powers to the U.S. Treasury Grants sweeping powers to the U.S. Treasury Significantly enhances the Bank Secrecy Act by imposing more stringent recordkeeping and anti-money laundering requirements on certain financial institutions Significantly enhances the Bank Secrecy Act by imposing more stringent recordkeeping and anti-money laundering requirements on certain financial institutions Expands BSA to include war against international terrorism and political corruption Expands BSA to include war against international terrorism and political corruption Expands forfeiture and subpoena powers Expands forfeiture and subpoena powers

13. 13 Targeted Vulnerable Systems U.S. Financial Sector - Bulk Currency, Courier Hubs, Banks, Money Service Businesses, Casinos, Insurance Companies, Internet, NGOs, Charities, and Alternate Money Remittal Systems U.S. Financial Sector - Bulk Currency, Courier Hubs, Banks, Money Service Businesses, Casinos, Insurance Companies, Internet, NGOs, Charities, and Alternate Money Remittal Systems Commercial & Trade Sector - Importers, Manufacturers, High Technology Industries, Bio-technology Companies, Chemical Companies, Health Care Industries, IT Services, and Munitions and Defense Industries Commercial & Trade Sector - Importers, Manufacturers, High Technology Industries, Bio-technology Companies, Chemical Companies, Health Care Industries, IT Services, and Munitions and Defense Industries Transportation Sector - Brokers and Freight Forwarders, and International and Domestic Carriers and Express Parcel Courtier Hubs (Air, Rail and Sea). Transportation Sector - Brokers and Freight Forwarders, and International and Domestic Carriers and Express Parcel Courtier Hubs (Air, Rail and Sea).

14. 14 Immigration and Customs Enforcement Strategy Identify domestic and international methods used by criminal and terrorist organizations to earn, move and store their illicit profits. Identify domestic and international methods used by criminal and terrorist organizations to earn, move and store their illicit profits. Establish national and international networks with private industry and combine ICE Investigative divisions under the umbrella of Economic Security. Establish national and international networks with private industry and combine ICE Investigative divisions under the umbrella of Economic Security. Recommend security enhancements to the private sector and to existing regulations and statutes. Recommend security enhancements to the private sector and to existing regulations and statutes.

15. 15 Financial Investigations Attack the systems, both where the system itself is corrupt or where the system is being exploited by criminal organizations (money orders, wire transfers).Attack the systems, both where the system itself is corrupt or where the system is being exploited by criminal organizations (money orders, wire transfers). Apply a multi-faceted approach to investigating these systems, going beyond enforcement and involving industry outreach and working groups with associated law enforcement, regulatory, and industry partners.Apply a multi-faceted approach to investigating these systems, going beyond enforcement and involving industry outreach and working groups with associated law enforcement, regulatory, and industry partners. Investigate the susceptibility and use of “Trade Based Money Laundering Systems” as a means of facilitating the financing and support of criminal organizations, to include terrorist financiers.Investigate the susceptibility and use of “Trade Based Money Laundering Systems” as a means of facilitating the financing and support of criminal organizations, to include terrorist financiers.

16. 16 Utilized Bank Secrecy Act (BSA) informationUtilized Bank Secrecy Act (BSA) information as a source of developing targets and as a source of developing targets and enhancing criminal investigations. enhancing criminal investigations. – Suspicious Activity Reports (SAR) – Currency Transaction Reports (CTR) – Currency or Monetary Instruments Reports (CMIR) Reports (CMIR) – Foreign Bank Account Reports (FBAR) – Reports of Cash Payment Over $10,000 Received in a Trade or Business Received in a Trade or Business

17. 17 USA PATRIOT Act Money Laundering Sections Section 314(a)Cooperative Efforts to Deter Money Laundering Section 315Foreign Corruption Offenses Section 317Long-Arm Jurisdiction over Foreign Money Launderers Section 319Subpoena and Summons Authority Over Corresponding Accounts Section 320Proceeds of Foreign Crimes Section 353 Penalties for Violating Geographic Targeting Orders Section 371Bulk Cash Smuggling Section 373Illegal Money Transmitting Businesses

18. 18 Section 314 (a) Requests Section 314(a) - encourages the sharing of financial information with government authorities. With the assistance of FinCEN this is accomplished by requesting that financial institutions conduct cross-checks to identify any and all accounts associated with the target(s) of investigation. In an effort to minimize the burden placed on financial institutions, ICE has employed a three prong vetting system to ensure that only the most important and necessary requests are forward to financial institutions. 1 - requests must be approved by the local SAC field office 2 - approved by the Headquarters Financial Investigations Unit 3 - reviewed by FinCEN Chief Counsel Office The 314(a) request has proven to be an invaluable investigative tool. In one of the larger cases, information was requested on 48 subjects of investigation and allowed investigators to identify an additional 287 individuals/entities from 100 different financial institutions.

19. 19 314(a) Case Example The Virginia Based Charities investigation is an ICE-led, multi agency task forceThe Virginia Based Charities investigation is an ICE-led, multi agency task force investigation of suspected money laundering, tax fraud, and terrorist material investigation of suspected money laundering, tax fraud, and terrorist material support violations allegedly being committed by individuals and companies support violations allegedly being committed by individuals and companies associated with SAFA TRUST, INC. Hundreds of charitable organizations of associated with SAFA TRUST, INC. Hundreds of charitable organizations of SAFA TRUST are suspected of channeling funds to Hamas, and Palestine SAFA TRUST are suspected of channeling funds to Hamas, and Palestine Islamic Jihad terrorist groups. Islamic Jihad terrorist groups. The task force continues to examine and analyze records obtained from thirty- The task force continues to examine and analyze records obtained from thirty- three search warrants executed on businesses and residences associated with three search warrants executed on businesses and residences associated with SAFA TRUST and Internet servers used by targets of this investigation. SAFA TRUST and Internet servers used by targets of this investigation. As of 2004 33 search warrants were executed, 547 boxes of documentary evidence As of 2004 33 search warrants were executed, 547 boxes of documentary evidence seized, 420 Grand Jury subpoenas issued for bank accounts and brokerage seized, 420 Grand Jury subpoenas issued for bank accounts and brokerage accounts. Two suspects of been arrested, one has been convicted of accounts. Two suspects of been arrested, one has been convicted of immigrations violations and one suspect has been indicted for violations of immigrations violations and one suspect has been indicted for violations of immigration law and the International Emergency Economic Powers Act (IEEPA). immigration law and the International Emergency Economic Powers Act (IEEPA). The USA PATRIOT Act eliminated judicial geographical limitations on search The USA PATRIOT Act eliminated judicial geographical limitations on search warrants, which allowed warrants signed in Virginia, to be executed in seven warrants, which allowed warrants signed in Virginia, to be executed in seven other judicial districts during this investigation. It also allowed for FinCEN to other judicial districts during this investigation. It also allowed for FinCEN to use Section 314a (Request for Information) to identify over 200 additional bank use Section 314a (Request for Information) to identify over 200 additional bank and other financial institution accounts. and other financial institution accounts.

20. 20 Section 315 – Foreign Corruption Offenses Section 315 amended 18 USC 1956 to include foreignSection 315 amended 18 USC 1956 to include foreign corruption crimes as predicate money laundering corruption crimes as predicate money laundering offenses. Section 320 provides for the Civil Forfeiture of offenses. Section 320 provides for the Civil Forfeiture of criminally derived proceeds of foreign corrupt practices. criminally derived proceeds of foreign corrupt practices. Crimes to include, under Section 315 of the USA PATRIOT Act: Crimes to include, under Section 315 of the USA PATRIOT Act: 1) bribery of a foreign public official or misappropriation of public funds by a foreign public misappropriation of public funds by a foreign public official official 2) smuggling munitions or technology with military applications 3) any “offense with the respect to which the United States would be obligated by multilateral treaty” to States would be obligated by multilateral treaty” to extradite or prosecute the offender extradite or prosecute the offender

21. 21 Foreign Public Corruption Unit Due to an increasing trend of criminal referrals from Central, South American and Caribbean governments seeking US assistance, an ICE-led multi agency foreign public corruption unit was created in South Florida to identify, locate and seize assets of corrupt government officials involved in the theft of embezzlement of governmental funds. ICE investigations have indicated that the criminally derived proceeds are being funneled to the United States for the purchase of assets. Foreign corruption investigations were enhanced by the new enforcement provisions provided for by the USA PATRIOT Act Sections 315 and 320.

22. 22 Section 371 - Bulk Cash Smuggling USA PATRIOT Act (Section 371) enhanced ICE’s ability to investigate the inbound/outbound smuggling of bulk cash by authorizing exclusive investigative jurisdiction of 31 USC 5332 offenses 31 USC 5332 - Bulk Cash Smuggling Makes it a crime to for anyone knowingly to conceal more than $10,000 in currency or monetary instruments on their person or in any conveyance, article of luggage, merchandise, or other container, and to transport or transfer or attempt to transport or transfer monetary instruments into or out of the U.S. for the purpose of evading the CMIR Reporting requirement. Agent should seek to add this charge along with the failure to report – 31 USC 5316(a).* *It should also be noted that 31 USC 5332 can be charged during pipeline stops involving the concealment of currency of more than $10,000, if it can be established the currency was going to be imported or exported into or out of the U.S. to avoid the reporting requirement in violation of 31 USC 5316(a). NO BORDER CROSSING is required. Additionally, the USA PATRIOT Act (Section 371) enhanced ICE’s ability to investigate the inbound/outbound smuggling of bulk cash by authorizing exclusive investigative jurisdiction of 31 USC 5332 offenses

23. 23 Foreign Public Corruption Unit Case Study In the courts of Nicaragua, former government officials were accused of the following criminal offenses: Laundering of money and/or assets derived Laundering of money and/or assets derived from illicit activities from illicit activities Fraud Fraud Theft of government propertyTheft of government property Embezzlement of public fundsEmbezzlement of public funds Public corruptionPublic corruption May 10, 2002, Nicaraguan Prosecutor files an official request for US assistance to identify and recover assets in the US Investigative efforts have revealed that funds obtained by these illicit activities were funneled through bank accounts in Panama, and used to purchase high value assets in the United States.

24. 24 Section 371 - Bulk Cash Smuggling 31 USC 5332 - Bulk Cash Smuggling Three Elements : 1. More than $10,000 2. Concealed 3. To evade the reporting requirement in violation of Title 31 USC 5316 31 USC 5332 - Bulk Cash Smuggling Three Elements : 1. More than $10,000 2. Concealed 3. To evade the reporting requirement in violation of Title 31 USC 5316

25. 25 Bulk Cash Smuggling Case Examples Border Related - Border Related - In December 2002, ICE agents initiated an investigation following the interception of two DHL packages destined for a country of concern. The packages contained approximately $280,000 concealed in articles of clothing. ICE agents subsequently conducted search warrants at a residence and retail businesses involved in the distribution of counterfeit clothing. The search warrants resulted in the seizure of $2 million in additional U.S. currency. The primary subject was indicted on 31 USC 5332 bulk cash smuggling charges and is scheduled for trial in May 2004. A civil complaint has been filed by the Assistant United States Attorney’s office for the forfeiture of the currency. Non-Border Related - Non-Border Related - On August 15, 2003, the Mississippi Highway Patrol stopped an individual for traffic violations. A search of the vehicle resulted in the seizure of $1,100,000 concealed within the vehicle. ICE agents conducted a follow-up investigation and determined the individual was traveling to Mexico, from North Carolina, to deliver the currency. On October 8, 2002, subject was indicted for violations of 18 USC 1956 and 31 USC 5332. On November 28, 2002, subject pled guilty to 31 USC 5332 (BCS) and was sentenced to 42 months incarceration.

26. 26 Section 373- Illegal Money Service Business Amended 18 USC 1960 by providing three ways a MSB can be prosecuted: MSB operates without a state license.*  MSB operates in violation of Treasury regulation requiring registration with FinCEN  MSB knowingly transfers money derived from a criminal offense, or transfers money intended to be used for unlawful purpose. Investigator does not need to trace the money. *Knowledge requirement removed; not necessary to prove target knew license was required or operating without a license was a crime.

27. 27 Section 373- Illegal Money Service Business Case Example USA PATRIOT Act enhanced 18USC1960 which allowed searches for a wider range of documents than would have been allowed under other criminal violations. A referral from the financial community initiated an investigation into a business unlawfully transmitting funds from the U. S. to a country of concern via the United Arab Emirates. This investigation has resulted in the execution of 34 search warrants, three wire intercepts, 13 individuals and one corporation indicted for transferring $12 million to Iraq in violation of money laundering laws, six arrests and the seizure of 4 businesses/bank accounts ($12 million in substitute assets from bank accounts). The issuance of sanctions/penalties totaling $12 million is pending. The primary subject has been convicted of money laundering.

28. 28 Major Money Laundering Countries in 2004 Antigua and Barbuda, Australia, Austria, Bahamas, Belize, Bosnia and Herzegovina, Brazil, Burma, Cambodia, Canada, Cayman Islands, China, Colombia, Costa Rica, Cyprus, Dominican Republic, France, Germany, Greece, Guernsey, Haiti, Hong Kong, Hungary, India, Indonesia, Isle of Man, Israel, Italy, Japan, Jersey, Latvia, Lebanon, Liechtenstein, Luxembourg, Macau, Mexico, Netherlands, Nigeria, Pakistan, Panama, Paraguay, Philippines, Russia, Singapore, Spain, Switzerland, Taiwan, Thailand, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, and Venezuela.

29. 29 Barbados Anti-Terrorism Act The Barbados Anti-Terrorism Act, 2002-6, Section 4, gazetted on May 30, 2002, criminalizes the financing of terrorism. The Government Of Barbados circulates lists of terrorists and terrorist entities to all financial institutions in Barbados. During 2003 and 2004, no evidence of terrorist financing was discovered in Barbados.

30. 30 Doing Business With The U.S.

31. 31 Domicile U.S. citizens and U.S. domiciliaries (USDs) are subject to U.S. estate, gift and generation-skipping transfer taxation on their worldwide assets. Nondomiciliary aliens are subject to these taxes only on situs assets. The test is whether he or she is "domiciled" in the U.S.

32. 32 Domicile Acquired Domicile is acquired in the U.S. if a person is present in the U.S., even for a short period of time, if he or she has no present intention of ever leaving. Residence, without the intent to remain permanently in the U.S., does not result in domicile. Once an individual is domiciled, the intention to change domicile will not change domicile unless accompanies by actual removal

33. 33 Establishing Domicile Domicile is established when physical presence and the intent to remain in that place permanently coincide

34. 34 U.S. Income Taxes – Federal, State, Local, Sales, Use – State Tax – Highest state tax is Vermont at 9.5%. – Capital Gains – Maximum 15% – Dividends – Maximum 15%

35. 35 Income Tax Rates

36. 36 Corporate Tax Rates Taxable income over Not over Tax rate $ 0 $ 50,000 15% 50,000 75,000 25% 75,000 100,000 34% 100,000 335,000 39% 335,000 10,000,000 34% 10,000,000 15,000,000 35% 15,000,000 18,333,333 38% 18,333,333.......... 35%

37. 37 Personal Service And Holding Companies Personal Service Corporations Personal service corporations are subject to a flat tax of 35% regardless of their income. Personal Holding Company Personal holding companies are subject to an additional tax on any undistributed personal holding company income. (Code Sec. 541) Year Rate 2005 15.0% 2000 and prior years 39.6%

38. 38 Accumulated Earnings Tax In addition to the regular tax, a corporation may be liable for an additional tax on accumulated taxable income in excess of $250,000 ($150,000 for personal service corporations). (Code Sec. 531) Year Rate 2005 15.0% 2000 and prior years 39.6%

39. 39 Transfer Taxes Probate - State Income With Respect To A Decedent Estate Taxes – Federal & State Inheritance Tax -State Gift Tax – Federal & State Generation Skipping Tax –Federal

40. 40 Probate Probate is a legal process that takes place after someone dies. It includes: proving in court that a deceased person's will is valid (usually a routine matter) identifying and inventorying the deceased person's property having the property appraised paying debts and taxes, and distributing the remaining property as the will (or state law, if there's no will) directs.

41. 41 Federal Estate Tax Federal estate tax rates are steep, starting at 39%. The highest marginal rate, for the largest estates, is 47%. The maximum rate is scheduled to decline gradually to 45% in 2009. There will be no estate tax in 2010, if the current tax law is not amended.

42. 42 Estate Tax Exemption

43. 43 Gifts If you give away more than $11,000 per year to any one person or non- charitable institution, you are assessed federal "gift tax," which applies at the same rate as the estate tax. Making gifts of $11,000 or less, however, can yield substantial estate tax savings if you keep at it for several years. You can give an unlimited amount of property to your spouse. If your spouse is not a U.S. citizen, you can give away up to $114,000 per year free of gift tax. Any property given to a tax-exempt charity avoids federal gift taxes. And money spent directly for someone's medical bills or school tuition is exempt as well.

44. 44 Gifts (Continued) Notice of Large Gifts For tax years beginning in 2003, recipients of gifts from certain foreign persons may have to report gifts under Sec. 6039F if the total value received in a taxable year exceeds $11,827; in 2002 it was $11,642; in 2001 it was $11,273.

45. 45 Generation Skipping Tax The generation-skipping transfer (GST) tax applies with respect to gifts or bequests of property through wills or trusts. It applies when gifts are made or property that is left to a donee or beneficiary who is two or more generations below the donor or decedent. Generally, a GST occurs when property benefits a "skip" person or when only the skip persons may benefit from the property in the future. A skip person is an individual assigned to a generation more than one generation below the generation of the transferor. The taxes are payable by the transferor or trustee.

46. 46 The GST Exemption Each transferor/decedent has a cumulative $1.5 million exemption from the GST. The exemption is allocated among gifts and bequests by the transferor or his estate. In other words, if a $750,000 exemption is used for lifetime transfers, $750,000 remains for death transfers.

47. 47 Transfer of U.S. Situs Property The testamentary transfer of U.S. situs property is subject to the GST tax provisions to the extent such property is includable in the gross estate of an NRA decedent. An inter vivos (lifetime) transfer by an NRA transferor is subject to the GST tax provisions where the property is situated in the U.S. and the transfer is otherwise subject to the gift tax provisions of I.R.C. Section 2501(a). These rules apply no matter what the citizenship of the donee or beneficiary.

48. 48 NRA Subject to GST Tax Only for U.S. Situs Property The GST tax may apply to an NRA decedent making transfers during lifetime or at death. However, the GST tax applies primarily to the transfer of U.S. situs property.

49. 49 State Estate & Inheritance Tax Inheritance Tax – Some States Estate Tax – Sponge Tax Disappearing

50. 50 CONTROLLED FOREIGN CORPORATION A controlled foreign corporation (CFC) is a foreign corporation that is controlled by "U.S. shareholders." Control means that the U.S. shareholders own more than 50% of the voting stock or value of the foreign corporation.

51. 51 U.S. Shareholder For this purpose, a "U.S. shareholder" is a U.S. person who owns, or is considered to own, at least 10% of the stock or the combined voting power of all classes of stock of a foreign corporation. Only U.S. persons can be “ U.S. shareholders. ” IRC § 957(c) refers to IRC § 7701(a)(30) for the definition of a U.S. person that is very broadly defined to include individuals, partnerships, corporations, trusts and estates.

52. 52 CFC Income Taxable IRC § 951(a)(1) requires certain shareholders of a CFC to include certain amounts in income, even if the corporation makes no distributions. Income passes through and is taxed only to a U.S. shareholder who owns stock in the CFC on the last day in the taxable year on which the corporation is a CFC.

53. 53 Deferral of CFC Income It is possible to legally defer taxes on the foreign source income of a CFC if the income does not come under the definitions of “subpart F income” and is not “U.S. source income.” A foreign corporation, owned by U.S. shareholders, with no U.S. source income, is not subject to U.S. taxation; and if it has no subpart F income, then the U.S. shareholders are subject to taxation only when distributions are made.

54. 54 Subpart F Income The following is a general summary of the income that is classified under subpart F. The five categories of subpart F income: (1) insurance income (2) foreign base company income (3) income from countries subject to international boycotts (4) illegal bribes, kickbacks and similar payments (5) income from countries the U.S. has severed diplomatic relations.

55. 55 Foreign Base Company Income The major category applicable to most foreign corporations is “foreign base company income,” which is defined to include: 1. 1. foreign personal holding company income 2. 2. foreign base company sales income 3. 3. foreign base company services income 4. 4. foreign base company shipping income foreign 5. base company oil related income

56. Taxable Subpart F Income If the foreign corporation has subpart F income, the income is taxable for each year earned (whether distributed or not), to the extent of earnings and profits, to the 10% or more shareholders who are determined by direct ownership

57. 57 U.S. Tax Planning

58. 58 DISPOSITIVE PROVISIONS OF WITH NO PLANNING SETTLOR Living Trust ALL TO SPOUSE NO ESTATE TAX $6,000,000 TO HEIRS Unlimited Marital Deduction TAX AT SPOUSES DEATH $10,000,000 $6,000,000 40% Estate Tax 100% Joint Property

59. 59 DISPOSITIVE PROVISIONS OF PROPOSED ESTATE PLAN TRADITIONAL PLANNING SETTLOR Living Trust MARITAL QTIP/QDOT TRUST TO SPOUSE NO ESTATE TAX $6,600,000 TO HEIRS FOR LIFE LIMITED BY CERTAIN STANDARD Credit Shelter Amount Unlimited Marital Deduction 100% TO HEIRS 40% ESTATE TAX AT SPOUSES DEATH $10,000,000 Equalized Estates $1,500,000 $8,500,000 $5,100,000

60. 60 DISPOSITIVE PROVISIONS OF PROPOSED ESTATE PLAN TESTAMENTARY ILIT $10,000,000 SETTLOR Living Trust $1,500,000 MARITAL QTIP/QDOT TRUST $6,500,000 TO SPOUSE NO ESTATE TAX $5,400,000 + $5 Mil. DB. = $10,500,000 TO HEIRS FOR LIFE LIMITED BY CERTAIN STANDARD Credit Shelter Amount Unlimited Marital Deduction 100% TO HEIRS TAX AT SPOUSES DEATH $2,000,000 JSWL $5 Million Death Benefit IRREVOCABLE LIFE INSURANCE TRUST 100% TO HEIRS Gifting $5,000,000 $1,500,000 Net $3,900,000

61. 61 Charitable Remainder Annuity Trust John Jones - Age 74 Mary Jones - Age 70 6.38% Annuity Trust Charity/Family Foundation Property Value $1,000,000 Cost $100,000 Gain $900,000 CRAT Principal $1,000,000 Annual Annuity Income $63,800 Estimated Income for 2 lives over 20.2 years $1,228,760 Transfer and sell tax-free. Bypass up to $900,000 gain may save $135,000. Income tax deduction of $272,825 may save $95,489. If trust earns 7.81%, pays 6.38% annuity, trust value increases. After two lives, trust passes without probate to charity.

62. 62 PROPOSED ESTATE PLAN TESTAMENTARY ILIT + Charitable Trust/Family Foundation PROPOSED ESTATE PLAN TESTAMENTARY ILIT + Charitable Trust/Family Foundation $10,000,000 SETTLOR Living Trust $1,500,000 MARITAL QTIP/QDOT TRUST $5,500,000 TO SPOUSE NO ESTATE TAX $3,465,000 + $5 Mil. DB. = $8,465,000 TO HEIRS Credit Shelter Amount Unlimited Marital Deduction TAX AT SPOUSES DEATH $2,000,000 JSWL $5 Million Death Benefit IRREVOCABLE LIFE INSURANCE TRUST 100% TO HEIRS Gifting $5,000,000 $1,500,000 Net $3,465,000 CRAT $1,000,000 Family Foundation Heirs Are Directors $1,667,073 Estate Tax reduces to 37%

63. 63 Non Resident Aliens

64. 64 General Rules  For U.S. Income Tax purposes, Non-Resident Alien (“NRA”) subject to tax on:  income derived from sources within U.S.; or  income effectively connected with conduct of trade or business within U.S.  For estate, gift and generation-skipping transfer tax purposes, NRA subject to tax only on NRA’s assets situated in the U.S.

65. 65 General Rules (Continued)  NRA entitled to a unified credit of $13,000, exempting $60,000 from U.S. estate tax  Unlimited marital deduction for property transferred to non-U.S. citizen spouse only if is transferred to a Qualified Domestic Trust (“QDOT”) NRA’s estate is entitled to deductions on a proportionate basis under §2053 and §2054

66. 66 Residency for Income Tax Purposes  Lawful permanent resident of the U.S. at any time during the calendar year (i.e., a “green card” holder);  Present in the U.S. for 183 days or more during the current calendar year;  Present in the U.S. for more than 31 days and less than 183 days during the current calendar year but meets the “substantial presence test”; or Makes an election to be treated as a resident alien

67. 67 Substantial Presence Test Met if:  The sum of the days present in the U.S. during current year plus 1/3 of the days present in the U.S. in the immediately preceding year plus 1/6 of the days present in the U.S. in the second immediately preceding year equals or exceeds 183 days (unless the individual is present for less than 183 days and has a closer connection to another country)  Example: NRA spent the following days in U.S. 2003 120 * 1 = 120 2002 150 * 1/3 = 50 2001 90 * 1/6 = 15 Total 185

68. 68 Residency for Estate and Gift Tax Purposes  Classification depends upon domicile  Domicile means (i) having a physical presence and (ii) present intention to remain indefinitely  Subjective Test Possible to be treated as resident of U.S. for purposes of income tax and not estate and gift tax

69. 69 Income Derived from Sources within U.S. for Income Tax Purposes  Dividends from domestic corporations  Rental income from real property located in U.S.  U.S. royalties  Capital gain from the sale of real property located in the U.S.  Salary for services performed within the U.S.  Interest on debt obligations. Exception for (i) portfolio interest, and (ii) bank deposit interest (but not money market accounts)

70. 70 Property Situated within U.S. for Estate Tax Purposes  Real property  Tangible personal property  Shares of domestic corporations  Debt obligations issued by the U.S. or a U.S. person unless income would be exempt portfolio interest  Deposits with a branch in U.S. of a foreign corporation, if the branch is engaged in the commercial banking business  But consider treaty override provisions.

71. 71 Property Situated Outside U.S. for Estate Tax Purposes  Real and tangible property located outside U.S.  Shares of stock issued by a corporation which is not a domestic corporation  Insurance death benefit on the decedent’s life  Deposits with a branch outside of the U. S. of a domestic corporation or domestic partnership if the branch is engaged in the commercial banking business Any debt obligation, the primary obligor of which is neither (i) a U.S. person, nor (ii) U.S. government

72. 72 Gift Tax Considerations  Subject to gift tax on tangible personal property situated in U.S.  Transfers of intangible personal property (i.e., stock in U.S. corporations) not subject to gift tax  NRA entitled to annual present interest exclusion  NRA entitled to unlimited marital deduction on gift to U.S. citizen spouses  Gift splitting not available  Joint tenancies in real property between spouses (after 7/13/88) not deemed a taxable gift Joint tenancies with respect to personal property is subject to gift tax

73. 73 Planning Techniques for NRA’s with U.S. Assets Minimize contacts with U.S. to avoid resident status  Form foreign corporation to hold U.S. assets  Ensure that corporate formalities are followed  Consider home country tax consequences  But §2036 may be applicable  Favor assets not subject to U.S. income tax (bank deposit) versus assets subject to U.S. income tax (deposit with U.S. broker)

74. 74 Planning Techniques for NRA’s with U.S. Real Property  Foreign partnership or LLC  Foreign grantor trust  Foreign corporation  U.S. corporation owned by a foreign corporation

75. 75 Planning Techniques for NRA’s with U.S. Beneficiaries  Outright gifts of non-U.S. assets to U.S. beneficiaries  Foreign Grantor Trust  Trust income can grow tax free (except for U.S. source income) during NRA’s life  Subject to accumulation distribution penalties after grantor’s death

76. 76 Use of Foreign Trusts A trust is a foreign trust if it fails either:  Court Test or  Control Test

77. 77 Court Test  Safe harbor:  Trust instrument does not direct that trust be administered outside U.S.; and  Trust is administered exclusively within the U.S; and  Trust does not have an automatic migration clause OR  U.S. court is able to exercise primary supervision over administration of trust

78. 78 Control Test  One or more U.S. persons have authority to control all substantial decisions of the trust  Substantial decisions include:  Distribution decisions  Selection of beneficiaries  Power to terminate  Power to remove, add or replace trustees  Investment decisions

79. 79 Foreign Trusts  Foreign grantor trust with U.S. grantor and U.S. beneficiaries  Foreign non-grantor trust  Foreign grantor trust with NRA grantor

80. 80 Taxation of Foreign Grantor Trust with U.S. Person as Grantor  Taxed in same manner as a domestic grantor trust  Foreign trust will be deemed to have a U.S. beneficiary unless both of the following tests are satisfied:  No part of income or principal of trust may be paid or accumulated for the direct or indirect benefit of a U.S. person; and  If the trust is terminated, no part of the income or principal can be paid, either directly or indirectly, to a U.S. person  Determination of whether trust has U.S. beneficiary is made annually

81. 81 Foreign Trusts with U.S. Grantor  Exceptions to the general rule under §679 include:  Transfer to a foreign trust by reason of the death of the U.S. transferor  Transfer to various tax-exempt foreign trusts  Transfer to a foreign trust in exchange for the property’s fair market value  If NRA transfers property to a foreign trust and becomes U.S. person within 5 years, the transfer is deemed to take place on date NRA became U.S. person

82. 82 Taxation of Foreign Non- Grantor Trust  Trust is taxed as NRA  U.S. source income is subject to U.S. income tax  Distributions to U.S. beneficiary taxable to U.S. beneficiary  Applicability of “throwback rules”  Difficult, if not impossible, to cleanse the accumulated income

83. 83 Taxation of Foreign Grantor Trust with NRA Grantor Most beneficial from a tax perspective  No U.S. income tax except on U.S. source income  Distributions to U.S. person do not carry out DNI

84. 84 Taxation of Foreign Grantor Trust with NRA as Grantor (Cont’d) Revocable without consent of another or with consent of subservient person or The grantor and/or the grantor’s spouse are the sole beneficiaries of the trust during grantor’s lifetime

85. 85 Recognition of Gain on Transfers to Foreign Trusts and §684  Immediate recognition of gain upon transfer of appreciated property by a U.S. person to a foreign trust  Applies to direct, indirect and constructive transfers to a foreign trust

86. 86 Recognition of Gain on Transfers to Foreign Trusts and §684 (Cont’d)  Exceptions:  A transfer to a foreign trust which is a grantor trust  A transfer to a foreign trust which is exempt under 501(c)(3)  A transfer to a foreign trust by reason of death of the U.S. person if property is includable in the transferor’s estate  A transfer to a foreign trust in exchange for fair market value

87. 87 Use of Domestic Situs Trusts for Non-U.S. Beneficiaries  Advantages:  Grantor/Beneficiaries may be domiciled in civil law jurisdictions that do not recognize trusts  Stable political/economic environment  Well established trust law  Several states offer ability to continue in perpetuity  Creditor protection

88. 88 Reporting Requirements – Form 3520  Foreign gifts received by U.S. person which in aggregate exceed $11,000  U.S. person receiving a distribution from a foreign trust  U.S. grantor must report transfers to trust  Return due on same date as the taxpayer’s personal income tax return  35% penalty for failure to report

89. 89 Reporting Requirements – Form 3520-A  U.S. person treated as owner of foreign trust must ensure that foreign trust files Form 3520-A annually  Return due on March 15 th  Penalty equal to 5% of gross value of trust’s assets

90. 90 Pre-Immigration Planning  Realize gains on appreciated securities prior to establishing residency  Make gifts to NRA spouse before residency to avoid limitations  Make gifts to third parties  Liquidate or reorganize foreign corporations to avoid CFC, PFIC or FPHC  Consider transfers to irrevocable trust to remove from donor’s estate  Consider purchasing offshore life insurance

91. 91 Traditional Income Tax Planning Onshore Qualified Retirement Plans Pension, 401(k) IRA, Roth IRA Tax Advantage Products Commercial Annuities Individual Retirement Arrangement ROTH IRA Tax Free Municipal Bonds Life Insurance

92. 92 Transfer Mechanisms Charitable Instruments Installment Sales Private Annuities

93. 93 Offshore Planning

94. 94 TRUSTEE Duress Clause Migration Or Flight Clause Trust Enforcer Clause: Emergency Trust Protector Clause SETTLOR TRUST ASSETS Offshore Asset Protection Trust Offshore Asset Protection Trust ENABLER TRUST PROTECTOR ENABLES” SAFETY & FLEXIBILITY OTHER JURISDICTIONS SAFETY AND FLEXIBILITY Settlor

95. 95 DISPOSITIVE PROVISIONS OF PROPOSED ESTATE & ASSET PROTECTION PLAN TESTAMENTARY FAMILY FOUNDATION SETTLOR MARITAL QTIP TRUST ADULT CHILDREN SEPARATE SHARE TRUSTS DEFECTIVE GRANTOR TRUST 1 2 435 6 7 VARYING % LIFELINE BARBADOS ASSET PROTECTION TRUST NEVADA SELF SETTLED APT NEST EGG SEPARATE SHARE TRUSTS FOR LIFE LIMITED BY AN ASCERTAINABLE STANDARD 50% - AT DEE’S DEATH 100%

96. 96 PROPOSED OFFSHORE ASSET PROTECTION BARBADOS ASSET PROTECTION TRUST Barbados APT DOMESTIC DEFECTIVE GRANTOR TRUST IBC SETTLOR OPPLI OFFSHORE BANK OFFSHORE TRUSTEE CO. EVENT OF DURESS MOVES TRUST & ASSETS TO APT GRANTOR PROTECTOR 100% INVESTMENT CUSTODOAN “NEST EGG” 100% LETTER OF WISHES DISCRETIONARY BENEFICIARIES

97. 97 INVESTMENT 4 DIVERSIFICATION REQUIREMENTS OF IRC SECTION 817 1.NO SINGLE INVESTMENT CONSTITUES 55% OF VUL PORTFOLIO; 2.NO TWO INVESTMENTS CONSTITUTE 70% OF VUL PORTFOLIO; 3.NO THREE INVESTMENTS CONSTITUTE 80% OF VUL PORTFOLIO; 4.NO FOUR INVESTMENTS CONSTITUTE 90% OF VUL PORTFOLIO VARIABLE LIFE INSURANCE POLICY OUTSIDE WRAPPER = LIFE INSURANCE INVESTMENT 3 INVESTMENT 2 </=55% 90% 1,2,3,4 80% 1,2,3 70% 1,2,3 SOPHISTICATED USE OF TRADITIONAL PRIVATE PLACEMENT VARIABLE LIFE INSURANCE WITH APT FEATURES U.S. Compliant Offshore Private Placement Life Insurance OPPLI

98. 98 Non U.S. Compliant OPPLI No Cash Value Test Insurance Cove Can Be As Low As 1% No Diversification Requirements Freely Invest Worldwide Including U.S.

99. 99 Traditional Offshore Private Banking Now Available Onshore in the United States

100. 100 “The trend to erode protection and enforce exchange of information is putting pressure on the offshore centers…Consequently it is our view that wealth managers should expect the number of offshore centers to decline from the current level of well over 50. Some 20 or 30 may be sustainable in the future, but the number may be even smaller…” _ PricewaterhouseCoopers Global Private Banking/Wealth Management Survey 2003 The Future of Offshore Investing

101. 101 Colorado Colorado is the world's newest international offshore center. Revolutionary new laws with extraordinary client protections. Colorado has the first and only international private banking center of its kind in the United States.

102. 102 International Offshore Colorado offers statutorily mandated asset protection. Client anonymity equaling or exceeding many offshore regions in the world. Non-US citizens who are non-US residents can be protected against political uncertainty and economic instability.

103. 103 Foreign Capital Depository A Foreign Capital Depository (“FCD”) is a financial institution in which individuals and their business entities, not being citizens or residents of the United States, may deposit assets for investment and safekeeping. An FCD does not lend money. It does not accept deposits from US citizens or residents. It is uniquely suited to the needs of affluent international families, businesses, and individuals.

104. 104 Federal Reserve System Participates in the Federal Reserve System with its own independent account and is able to transact business with the privileges, duties, and obligations applicable.

105. 105 Does Not Violate Public Policy “Legislative Declaration: (5) For the purposes of this part 3, the general assembly declares that the recognition of a foreign judgment pursuant to article 62 of Title 13, [the “Uniform Foreign Money-Judgments Recognition Act”] and the execution of a foreign judgment against a customer of a foreign capital depository is repugnant to the public policy of this state if either would: (a) Facilitate the arbitrary or unlawful interference with an individual’s privacy in contravention of international law; (b) Undermine individual rights, including private property rights, provided for in the Colorado constitution and state law; (c) Stimulate or engender lawsuits motivated by greed or pecuniary speculation and lacking a good faith argument or other legally sound purpose; (d) Facilitate civil prosecution arising from class or ethnic hatred and nurtured by a corrupt legal system; or (e) Threaten the financial stability of the depository or the state by discouraging foreign depositors and investors from becoming customers or by encouraging customers to withdraw their capital from the depository.”

106. 106 The Colorado Foreign Capital Depository Act Colorado Revised Statutes Section 11-37.5-301 “Legislative Declaration: (1) The general assembly finds, determines, and declares that: (a) Political instability, economic insecurity, and financial risk outside the United States create incentives for the transfer and investment of foreign capital derived from legitimate estates and business activities to relatively safe places such as Colorado.” Colorado Revised Statutes Section 11-37.5-102

107. 107 This is just a short list of some of the relationships that the Colorado Foreign Capital Depository Act granted: Custodial Duties Trust Powers Power of Attorney Open-Architecture Asset Management Dozens of Other Customized Relationships

108. 108 How This Benefits Your Clients Every financial institution offers their clients privacy. The difference is that a Colorado Depository offers your client complete and discreet financial anonymity. For instance, pseudonymous accounts are established for your identification and your account transactions. It also has the statutory duty to protect and hold all your information confidentially.

109. 109 For instance, it is a crime, punishable by up to several years in prison, for any bank employee to reveal any of the following: your client’s name, any record or document held by the bank that directly or indirectly pertains to your client, or any information contained in any of your client’s documents. Also, the confidential relationship between your client and the bank is protected by restrictions on the disclosure of information belonging to you to government agencies.

110. 110 A government official may not request or receive any of your client’s information, except under stringent circumstances where a detailed process involving the submission of an administrative subpoena, a search warrant, or a judicial subpoena is followed.

111. 111 A government official who obtains any of your client’s information must also take every possible precaution to protect your client’s identity. If the government official discloses your client’s identity to any person not officially associated with the investigation, it is a crime, which is not only subject to rigid civil penalties, but also to criminal proceedings. Furthermore, the banking institution must provide for your client’s legal defense in the event that a civil judgment is rendered against your client in a jurisdiction outside the United States and is registered in Colorado.

112. 112 Financial Anonymity The offshore financial institution is required by Colorado law to protect all your information and to keep such information completely confidential. Pseudonymous accounts are established for your identification and your account transactions.

113. 113 Powerful Asset Protection The offshore financial institution is required by law to defend your private interests in US courts as necessary, and is committed to doing so aggressively. Foreign judgments are not easily recognized in Colorado. Plaintiffs bringing legal action against our client’s assets held in Colorado must commence the case in Colorado and are prohibited from hiring counsel on a contingency fee basis.

114. 114 Moreover, there is no simple prejudgment attachment of accounts. Foreign judgments are not automatically entitled to full faith and credit in Colorado. There is no simple domestication of foreign judgments. Plaintiffs who bring unsuccessful legal action against assets held by offshore financial institution shall be liable for the depositor’s lawyer’s fees, and may be liable for damages up to $1 million.

115. 115 Summary Anonymous Accounts No OECD Problems No FATF Problems A person seeking recognition of a foreign judgment against you is prohibited by Colorado law from engaging legal counsel on a contingency fee basis. Short Statutes of Limitation Limits the recognition of foreign judgments. Plaintiff bears the burden of proof and must prove that the decision was rendered in a system with impartial tribunals or procedures compatible with the required due process of law.

116. 116 Colorado does not recognize extra-territorial judgments: When the judgments undermine individual rights, including property rights, lawsuits motivated by greed, actions motivated by ethnic hatred, or ones that threaten the financial stability of the depository or the state. If a lawsuit is unsuccessful, the court in which recognition of a foreign judgment is unsuccessfully sought may award damages up to $1 million against the party, which brought the lawsuit. Finally, it is a nice place to come to visit your money!

117. 117 A Successful Approach to Investment Management to Investment Management

118. 118 The Investment Management Team Introducing Our Six-Step Investment Process Building A Successful Investment Strategy

119. 119 “In investing, what is comfortable is rarely profitable.” Robert Arnott Active Asset Allocation SOURCE: Journal Of Financial Planning Emotion All Too Often Guides Investment Decisions Loss Enthusiasm Confidence Caution Doubt and Suspicion Indifference Denial Concern Fear Panic Despair Greed CYCLE OF EMOTION Sell Buy

120. 120 Objective: Increase likelihood of achieving investment goals Solution: Build a Capable Investment Management Team Make Decisions within a Disciplined Six-Step Investment Process Overcoming Obstacles

121. 121 INVESTOR INVESTMENT ADVISOR PORTFOLIO STRATEGIST INVESTMENT MANAGERS Building Your Investment Management Team

122. 122 Interact and communicate with client on an ongoing basis Deliver Quarterly Performance Reviews Monitor performance relative to client’s goals and objectives Suggest changes to client’s investment strategy when client’s financial circumstances change Our Duties And Responsibilities As Your Investment Advisor

123. 123 Select asset classes Determine target asset mix Analyze investment managers for style and performance Select and monitor investment managers Reallocate and rebalance Portfolios Duties Of The Portfolio Strategist

124. 124 Analyze and identify specific investments based on their area of expertise Maintain a disciplined investment process and consistent investment style Provide competitive performance relative to peer group or asset class benchmark Duties Of The Investment Managers

125. 125 Step 1: Financial Analysis What are Your Client’s Financial Goals and Objectives? 1: Financial Analysis

126. 126 Our Recommendations  Risk / Return Profile  Investment Policy Statement  Customized Proposal Client’s Financial Information  Time Horizon  Rate of Return Objective  Risk Tolerance  Liquidity Needs  Tax Considerations Financial Position

127. 127 Potential Return Potential Risk/Volatility Aggressive Growth Growth Balanced Growth Balanced Balanced Income Capital Preservation ConservativeModerateAggressive Establishing The Client’s Risk Return Profile

128. 128 The financial analysis will lead to a written Investment Policy Statement which is designed to: Establish reasonable expectations, objectives and guidelines for investing the portfolio Set forth an investment structure detailing permitted asset classes and the expected allocation among asset classes Create the framework for a well diversified asset mix designed to generate acceptable long-term returns at a suitable level of risk Encourage effective communication Creating an Investment Policy Statement

129. 129 Step 2: Asset Allocation Modeling 1: Financial Analysis 2: Asset Allocation 3: Portfolio Strategist Selection 4: Investment Manager Selection 5: Monitoring and Rebalancing 6: Reporting What is the Best Way to Allocate Your Client’s Assets?

130. 130 Stocks Cash Real Estate Bonds Asset allocation is the process of allocating investment funds to specific asset classes so that expected return is maximized for a given level of risk. 2: Asset Allocation Asset Allocation Defined

131. 131 According to a respected academic study, asset allocation is responsible for over 90% of variations in portfolio performance. Brinson, Hood & Beebower, Financial Analysts Journal, 1986 Brinson, Singer & Beebower, Financial Analysts Journal, 1991 91.5% Asset Allocation 4.6% Securities Selection 1.8% Timing 2.1% Other Factors Importance Of Asset Allocation

132. 132 Analyzes the historical performance attributes of each of the asset classes selected for the portfolio. Creates an “optimal” asset mix to maximize the expected return for each level of risk. STRATEGIC TACTICAL The Two Primary Approaches to Asset Allocation Both approaches are founded on the Nobel-Prize winning principles of Modern Portfolio Theory, which:

133. 133 The strategic approach utilizes Modern Portfolio Theory to develop a long-term target asset mix. The target asset mix remains relatively consistent throughout the investment period. Periodic rebalancing to the target asset mix controls risk and promotes disciplined selling of winners and buying of losers. Asset Class Selection & Weighting Asset Mix STRATEGIC Strategic Asset Allocation

134. 134 Establish long-term target asset mix by applying the principals of Modern Portfolio Theory Gather proprietary capital market research from investment analysts Determine where the most attractive opportunities currently exist Adjust asset mix accordingly, within permissible ranges for each Risk/Return profile TACTICAL Asset Mix Proprietary Market Research Tactical Asset Allocation Asset Class Selection & Weighting

135. 135 Step 3: Portfolio Strategist Selection 1: Financial Analysis 2: Asset Allocation 3: Portfolio Strategist Selection 4: Investment Manager Selection 5: Monitoring and Rebalancing 6: Reporting Who is the Right Portfolio Strategist for You?

136. 136 Substantial research across global capital markets Asset allocation and portfolio strategy as a core competency Investment Policy Committees composed of senior investment professionals Disciplined investment processes We have developed strategic alliances with institutional investment firms demonstrating: Portfolio Strategist Selection

137. 137 Our Portfolio Strategists 3: Portfolio Strategist Selection We use well known Portfolio Strategists for our clients.

138. 138 Domestic Global Strategic Tactical Our Portfolios Strategists’ Approaches To Asset Allocation

139. 139 Strategic or Tactical Asset Allocation Domestic or Global One or More Portfolio Strategists Amount Invested With Each Strategist Passive (Index) or Active Management Standard or Tax-Managed Model Portfolios 3: Portfolio Strategist Selection Determine…

140. 140 Step 4: Investment Manager Selection 1: Financial Analysis 2: Asset Allocation 3: Portfolio Strategist Selection 4: Investment Manager Selection 5: Monitoring and Rebalancing 6: Reporting Which Investment Approach and Investment Managers are Right For Your client?

141. 141 Mutual Funds Variable Annuities Exchange Traded Funds Privately Managed Accounts 4: Investment Manager Selection Implementing Your Investment Strategy There are a variety of ways to implement your investment strategy. We will work with you to determine the approach that best fits your needs.

142. 142 Implementing Your Investment Strategy Selecting an investment management approach that reflects your client’s: Amount of Investable Resources Individual Investment Requirements Tax Considerations 4: Investment Manager Selection

143. 143 The Manager Selection Process Each Portfolio Strategist has a unique and disciplined process for selecting Investment Managers. Regardless of the investment approach we ultimately recommend, the client has the assurance of each Strategist’s best efforts in manager review and due diligence. 4: Investment Manager Selection

144. 144 Step 5: Monitoring and Rebalancing 1: Financial Analysis 2: Asset Allocation 3: Portfolio Strategist Selection 4: Investment Manager Selection 5: Monitoring and Rebalancing 6: Reporting We are on Constant Watch. As an Investment Advisor, it’s your responsibility to continually monitor your client’s investment portfolio, oversee the Portfolio Strategist’s decisions to rebalance and realign your portfolio, and clearly communicate the changes to you.

145. 145 Strategic Rebalance to original target asset mix Tactical Adjust asset mix based upon current proprietary research Both Monitor performance of investment managers and replace when necessary 5: Monitoring and Rebalancing Portfolio Monitoring And Rebalancing

146. 146 Stocks 60% Bonds 30% Cash 10% Cash 5% Stocks 70% Bonds 25% Target Asset Mix Change in Asset Mix Over Time Rebalanced to Target Mix Stocks 60% Bonds 30% Cash 10% Strategic Asset Allocation Rebalance

147. 147 Stocks 60% Bonds 30% Cash 10% Cash 5% Stocks 70% Bonds 25% Target Asset Mix U.S. Stock Market Undervalued U.S. Stock Market Overvalued Stocks 30% Bonds 50% Cash 20% Tactical Asset Allocation Rebalance

148. 148 Step 6: Reporting 1: Financial Analysis 2: Asset Allocation 3: Portfolio Strategist Selection 4: Investment Manager Selection 5: Monitoring and Rebalancing 6: Reporting Your Client Needs Knowledge, Not Just Information. We provide clear, ongoing communications.

149. 149 Monthly Custodial Statements Quarterly Performance Reports Year-End Tax Planning Report Online Access to Account Information, Market Commentary, and Investment Research 6: Reporting Our Reporting And Communications Program

150. 150 Our Approach to Investment Management: Emphasizes a disciplined process to eliminate an emotional response to short-term market volatility Delivers great capability to all investment management decision- making Aligns your investment strategy with your long-term investment objectives and tolerance for risk INVEST IN THE FUTURE In Summary

151. 151 Emphasizes the importance of asset allocation Provides a wide variety of investment approaches to develop a customized investment strategy Provides on-going monitoring of your portfolio Delivers clear, timely reporting to keep you on top of your portfolio’s progress Our Approach to Investment Management: INVEST IN YOUR FUTURE In Summary