Dorsey, Wright & Associates...Dorsey, Wright & Associates A Tactical Approach to Portfolio...

www.dorseywright.com 804.320.8511

1011 Boulder Springs Dr; Suite 150; Richmond, VA 23225

Tom DorseyPresident & Founder

[email protected]

Dorsey, Wright & Associates

A Tactical Approach to Portfolio Management

DWA Background:Founded January 1987

Research Services:

“Daily Equity & Market Analysis Report” — a daily

research report covering global capital markets, focusing

upon tactical asset rotation and risk management.

Extensive technical analysis website available with over

7,000 domestic stocks, 19,000 international stocks, 15,000

mutual funds, and 1,100 ETFs charted on a Point & Figure

basis

26 different Guided ETF Model Portfolios, covering the

scope of asset classes and ETF providers

Weekly ETF Reports featuring each of the 26 guided

models.

DWA Media produces its own multimedia (video)

presentations and weekly podcasts

D.A.L.I.: Asset Allocation Guidance

based upon relative strength analysis

across, and among, asset classes.

Tactical Tilt Models: Turn-key 3rd party

ETF model management.

Most Recently Published Book by DWA:

Point & Figure Charting,

4th Edition

2Copyright © 1995-2014 Dorsey, Wright & Associates, LLC.® For Financial Professional Use Only. Not For Use With The Public.

Money Management Services & Products:

Mutual Funds:

Arrow DWA Balanced Fund (DWAFX)

Arrow DWA Tactical Fund (DWTFX)

Exchange Traded Funds:

PowerShares DWA Momentum (PDP)

PowerShares DWA Developed Momentum (PIZ)

PowerShares DWA Emerging Momentum (PIE)

PowerShares DWA Smallcap Momentum (DWAS)

Unit Investment Trusts with First Trust:

Dorsey, Wright RS Dividend Trust

Dorsey, Wright RS Top 50 Trust

Separately Managed Accounts:

Numerous account choices, from “Systematic RS” to

“Global Macro”

WHAT EVERY INVESTOR IS LOOKING FOR

Copyright © 1995-2014 Dorsey, Wright & Associates, LLC.® For Financial Professional Use Only. Not For Use With The Public.

Point & Figure Chart

S&P 500 Index (SPX)

Can we be smarter about what we buy AND how we buy

it?

Symbol Index12/31/99 –12/31/13

Performance

DWACOMMOD Continuous Commodity Index 151.58%

SML S&P 600 Small Cap Index 236.49%

EEM MSCI Emerging Markets Index 133.23%

SPXEWI S&P 500 Equal Weight 152.53%

AGG Barclays Aggregate Bond Fund 44.18%

MNYMKTDWA Money Market Proxy - 13 Week T-Bill 30.59%

SPX S&P 500 25.80%

EFA MSCI EAFE Index Fund 13.85%

Beginning of DecadeNow

The performance numbers are pure price returns, not inclusive of dividends, fees, or other expenses. Past performance not indicative of future results. Potential for profits accompanied by possibility of loss .

Copyright © 1995-2014 Dorsey, Wright & Associates, LLC.® Financial Professional Use Only. Not For Use With The Public.

Investors cannot invest directly in

an index. Indexes have no fees.

The reader should not assume

that any investments identified

were or will be profitable or that

any investment

recommendations or investment

decisions we make in the future

will be profitable.

We all understand the basic forces of supply and demand.

The same forces that affect prices in the supermarket also affect prices in the stock market.

Stocks, sectors, and asset classes move in and out of favor just like produce in the supermarket.


Supply & Demand

Double Top Double Bottom

45 O 45 X X

O X O X O

O X O X O

O X O O

O X X S

40 O X 40 X O

O X X O

O X X O

O X X O

O X X O

35 O B 35 X O

O X X X

O X O X X

O X O X X

O O X

30 30


The 2 Most Basic Patterns

Understand these two patterns and you understand how to read any stock, mutual fund, ETF, relative strength or indicator chart DWA creates.

Point & Figure Basics

• X’s = Price is rising

• O’s = Price is falling

• Alternate columns of X’s and O’s

• Minimum of 3 X’s or O’s in a column

• Time = First action in month use number (1 for January, etc.)

• Use daily high & low for charting price action


Kimberly Clark (KMB)

The best financial plan is a stock that

goes up….

Then …. 2008


Now …. 2014

Copyright © 1995-2014 Dorsey,

Wright & Associates, LLC.® For

Financial Professional Use Only.

Not For Use With The Public.

August – December 2011

Magazine Covers


12

Relative Strength Research

Stocks with the best momentum outperformed those with the worst

momentum, both in absolute terms and relative to the entire equity market

(Moskowitz, Tobias, Momentum Investing, 2010).

12Copyright © 1995-2014Dorsey, Wright & Associates, LLC.® For Financial Professional Use Only. Not For Use With The Public.

Big Picture Concepts: What is “Trend Following”?

What Does “Trend Adaptation” Look Like?

Track & Field

400 meter World RecordMichael Johnson

43.18 seconds

4x100 meter World RecordTeam Jamaica

36.84 seconds

Swimming800m Freestyle World Record

Zhang Lin

7:32.12 seconds

4x200m Freestyle World Record

Team United States

6:58.55 seconds

Lesson:

Four “trends” can be

better than one.


14

• All major sports have a ranking system. The Point & Figure Relative Strength tool is the ranking system we use for Stocks, ETF’s.

• Daily Calculation:

Stock X 100 = Relative StrengthIndex Reading

• This reading is plotted on a Point & Figure chart which then tells us whether we can expect that stock or ETF to outperform or underperform the base index.

Relative Strength Calculation



The performance numbers above are pure price returns, not inclusive of dividends, fees, or other expenses. Past performance not indicative of future results. Potential for profits accompanied by possibility of loss

With Positive RS…

(4/7/1999 – 2/20/2007)

SBUX: 323.48%

SPXEWI: 87.55%

SPX: 10.01%

With Negative RS…

(2/20/2007 – 3/16/2009)

SBUX: -67.15%

SPXEWI: -53.34%

SPX: -48.35%

With Positive RS. . .

(3/16/2009 – 12/31/2013)

SBUX: 627.18%

SPXEWI: 211.61%

SPX: 145.18%

Market Relative StrengthStarbucks (SBUX)

vs.

S&P Equal Weighted Index (SPXEWI)

This example is presented for

illustrative purposes only, and does not represent a past or present recommendation.

When RS Chart is on a buy signal, it

suggests outperformance by the numerator

(i.e. SPX).

RS Signal: Buy = Outperformance of SPX to Bonds

Sell = Underperformance of SPX to Bonds

Start

Date

End

DateSignal SPX AGG

11/22/00 7/31/03 Sell - 25.11% 23.16%

7/31/03 7/15/08 Buy 22.68% 1.84%

7/15/08 6/5/09 Sell - 22.62% - 0.69%

6/5/09 12/31/13 Buy 96.62% 6.36%

Buy and hold SPX: 39.78%

Buy and Hold AGG: 32.48%

Switching: 195.03%

Asset Class Relative

Strength Example

16

S&P 500 Index (SPX)

vs.

Barclays Aggregate Bond Index (AGG)


The performance numbers above are pure price returns, based on the applicable index not inclusive of dividends, fees, or other expenses. Past performance not indicative of future results. Potential for profits accompanied by possibility of loss

This example is presented for illustrative purposes only and does not represent a past or present recommendation.


Trend Adaptation in Asset Classes

US Equities Int’l Equities

Commodities Fixed Income

Foreign Currencies

Cash

The Dynamic Asset Level Investing (D.A.L.I.) tool evaluates the leadership characteristics of “macro” asset classes, and ranks them from strongest to weakest based on their relative strength score.


Current D.A.L.I. Process

Determine Allocation to each Asset Class through Relative

Strength Analysis

19

0%

5%

10%

15%

20%

25%

30%

35%

40%

Domestic Equity "Flexible" Weight Ranking Domestic Eqty


Domestic Equity “Flexible” Weight Ranking History

Domestic

EquityIntl. Equity Commodity Fixed Income Currency Cash

1990s 76% 16% 2% 2% 4% 0%

2000s 4% 51% 33% 4% 6% 3%

2010 - 2013 84% 10% 5% 0% 0% 0%

Domestic Equities: Back at the Top


Percent of Time Asset Class Was Ranked in the #1 Spot of D.A.L.I.


26.37%

29.50%

15.58%

27.68%

24.50%

29.80%

18.89%

15.33%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%1

99

0

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Performance Differential Among Asset Classes: 1990 - 2013

Relative strength-based strategies (such as DALI) will tend to offer excess return over their benchmark more readily when the dispersion between the best and worst is very wide; yet the strategy will tend to suffer, or the benefit is muted, when the dispersion is narrower.

2010, 2011, and 2012 saw the performance differentials between asset classes narrow significantly, well below the historical average of 32.92%. In 2013 the difference was 36.54% between the best (US Equity) and the worst (Commodity).

The differentials above are based on pure price return performance numbers, not inclusive of dividends, fees or other transaction costs. Potential for profits is accompanied by possibility of loss. Past performance is not indicative of future results.

2222

RS Screening Sieve

(Leadership within market & family)

Sector Funds within an ETF

“Family”

(ex. First Trust - 21 ETFs)

High RS Sector Model

(5 ETFs)

First Trust Focus Five Model

22Copyright © 1995-2014Dorsey, Wright & Associates, LLC.® For Financial Professional Use Only. Not For Use With The Public.

FBT

First Trust Focus Five Model Matrix

ETF Matrix Function:

• Summation of “big RS

wrestling match” between First

Trust sector line-up

• Focus buying on top quartile

• Hold position until RS

deteriorates sufficiently


24

First Trust Focus Five ETF Model (FTRUST5)

First Trust Focus Five ModelPerformance History

The First Trust Focus Five

Model has not yielded

positive excess returns

every quarter, but the

rotation process has

provided for success (both

absolute & relative) since

inception.

Copyright © 1995-2014Dorsey, Wright & Associates, LLC.® For Financial Professional Use Only. Not For Use With The Public.

First Trust

Focus Five

(FTRUST5)

S&P 500 (SPX)

Excess

Returns of

FTRUST5

** Q4 2009 4.85% 3.12%** 1.73%

2009

Q1 2010 7.99% 4.87% 3.12%

Q2 2010 -11.76% -11.86% 0.10%

Q3 2010 16.43% 10.72% 5.71%

Q4 2010 13.03% 10.20% 2.83%

2010 25.41% 12.78% 12.63%

Q1 2011 6.45% 5.42% 1.03%

Q2 2011 -1.53% -0.39% -1.14%

Q3 2011 -21.52% -14.33% -7.19%

Q4 2011 10.77% 11.15% -0.38%

2011 -8.88% 0.00% -8.88%

Q1 2012 10.68% 12.00% -1.32%

Q2 2012 -3.18% -3.29% 0.11%

Q3 2012 3.64% 5.76% -2.12%

Q4 2012 1.75% -1.01% 2.76%

2012 13.01% 13.41% -0.40%

Q1 2013 13.61% 10.03% 3.58%

Q2 2013 2.64% 2.36% 0.28%

Q3 2013 10.83% 4.69% 6.14%

Q4 2013 8.84% 9.92% -1.08%

2013 40.66% 29.60% 11.06%

Cumulative

(10/21/2009 -

12/31/2013)

90.45% 70.92% 19.53%

The Model’s numbers reflect an annual fee of 1%, deducted quarterly. Investors cannot invest directly in an Index. Neither the returns for the Model nor the SPX include the reinvestment of dividends. Past performance not indicative of future results. Potential for profits accompanied by possibility of loss

**10/21/2009 is the inception date of the First Trust Focus 5 Model.

Return Above S&P 500 Return Below S&P 500

25

Using Relative Strength: Produces Excess Returns, But Will Experience RS Laggard Periods

Will have quarters of underperformance when RS laggards can bounce, while new leadership is found.

* FTRUST5 began trading in the fourth quarter 2009 (10/21/2009).


The Model’s numbers reflect an annual fee of 1%, deducted quarterly. Investors cannot invest directly in an Index. Neither the returns for the Model nor the SPX include the reinvestment of dividends. Past performance not indicative of future results. Potential for profits accompanied by possibility of loss

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

Quarterly Excess Returns for First Trust Focus 5 Model (FTRUST5) vs. S&P 500 (SPX)

December 31, 1999 - December 31,2012

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2000 - 2012

Avg. Annual %

Money Int'l Int'l Int'l Fixed Int'l Fixed US

Commod. Market Commod. Equities Equities Commod. Equities Commod. Income Equities Commod. Income Equities Commod.

14.39% 3.33% 18.42% 40.83% 20.91% 21.44% 26.65% 17.24% 2.05% 33.79% 25.19% 4.07% 13.59% 5.85%

Money Fixed Foreign US Int'l US Int'l Money US US Int'l Strategic

Market Income Currency Equities Commod. Equities Equities Equities Market Equities Equities DWA6040 Equities Allocation

5.91% 1.81% 9.75% 27.37% 12.47% 16.62% 13.34% 12.63% 1.33% 23.89% 14.18% 2.42% 13.11% 2.82%

Fixed Foreign Fixed Strategic Strategic Strategic Strategic Foreign Foreign Strategic Strategic Money Strategic Money

Income Currency Income Allocation Allocation Allocation Allocation Currency Currency Allocation Allocation Market Allocation Market

4.18% -5.33% 2.37% 24.24% 11.10% 7.30% 12.93% 7.62% -10.06% 22.14% 10.36% 0.05% 9.39% 2.07%

Money US US Strategic US Foreign

DWA6040 DWA6040 Market DWA6040 Equities Equities Commod. Allocation DWA6040 Commod. DWA6040 Equities DWA6040 Currency

-4.07% -6.82% 1.58% 15.26% 9.84% 3.65% 9.19% 6.25% -23.01% 20.07% 8.92% -0.14% 8.19% 2.07%

Strategic Strategic Strategic Foreign Foreign Money Money Int'l Foreign Foreign Int'l

Allocation Allocation Allocation Currency Currency Market DWA6040 Market Commod. DWA6040 Equities Currency Currency Equities

-4.58% -8.70% -7.72% 14.93% 6.27% 3.01% 7.79% 4.36% -27.05% 14.37% 8.69% -1.63% 1.97% 1.90%

Foreign US Foreign Strategic Foreign Foreign Strategic Fixed Fixed

Currency Equities DWA6040 Commod. DWA6040 DWA6040 Currency DWA6040 Allocation Currency Currency Allocation Income Income

-6.65% -11.77% -13.13% 11.32% 5.32% -1.96% 6.93% 3.61% -28.89% 8.93% 5.86% -4.67% 0.59% 1.19%

US Int'l Money Money Fixed Money US US Money Fixed Money

Equities Commod. Equities Market Market Income Market Equities Equities Market Income Commod. Market DWA6040

-8.03% -17.18% -14.95% 0.98% 1.40% -2.04% 4.74% 3.47% -37.81% 0.21% 2.14% -9.20% 0.09% 0.71%

Int'l Int'l US Fixed Fixed Foreign Fixed Fixed Int'l Fixed Money Int'l US

Equities Equities Equities Income Income Currency Income Income Equities Income Market Equities Commod. Equities

-15.31% -19.73% -22.53% -0.67% -0.39% -7.99% -0.70% 2.74% -43.48% -0.48% 0.16% -16.07% -3.64% 0.50%

Legend:

Tactical Allocation Inventory Strategic Allocation Inventory Weighting

Money Market DWA Money Market (MNYMKT) Vanguard Total Stock Market ETF (VTI)* 26.70%

Fixed Income Vanguard Total Bond Fund (BND) Vanguard MSCI EAFE ETF (VEA) 19.40%

Foreign Currency DWA Foreign Currency Index (DWAFXI) Vanguard MSCI Emerging Markets ETF (VWO) 10.40%

Commodity Greenhaven Commodity Fund (GCC) Vanguard REIT Index ETF (VNQ)* 7.30%

International Equities SPDR MSCI ACWIsm ex-US ETF (CWI) iPath Dow Jones-UBS Commodity Index ETN (DJP) 6.20%

US Equities iShares S&P 1500 Index (ITOT) Vanguard Total Bond Market ETF (BND) 30.00%

DWA 6040 Index (DWA6040) represents a daily rebalanced index of 60% S&P 500 Index (SPX) and 40% Vanguard Total Bond Index (BND)

* Prior to 2002, EUSA was substituted for VTI for hypothetical returns, and IYR was substituted for VNQ

“Strategic Allocation” and Money

Market have produced

similar returns since

12/31/1999 …

Does anyone charge more

than 0.75% in fees?

Can we be smarter about what we buy AND how we

buy it?

Strategic Allocation Left to it’s Own

DevicesDecember 31, 1999 - December 31, 2012

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2000 - 2012

Avg. Annual %

Money Int'l Int'l Int'l Fixed Int'l Fixed US

Commod. Market Commod. Equities Equities Commod. Equities Commod. Income Equities Commod. Income Equities Commod.

14.39% 3.33% 18.42% 40.83% 20.91% 21.44% 26.65% 17.24% 2.05% 33.79% 25.19% 4.07% 13.59% 5.85%

Money Fixed Foreign US Int'l US Int'l Money US US Int'l Strategic

Market Income Currency Equities Commod. Equities Equities Equities Market Equities Equities DWA6040 Equities Allocation

5.91% 1.81% 9.75% 27.37% 12.47% 16.62% 13.34% 12.63% 1.33% 23.89% 14.18% 0.62% 13.11% 2.82%

Fixed Foreign Fixed Strategic Strategic Strategic Strategic Foreign Foreign Strategic Strategic Money Strategic Money

Income Currency Income Allocation Allocation Allocation Allocation Currency Currency Allocation Allocation Market Allocation Market

4.18% -5.33% 2.37% 24.24% 11.10% 7.30% 12.93% 7.62% -10.06% 22.14% 10.36% 0.05% 9.39% 2.07%

Money US US Strategic US Foreign

DWA6040 DWA6040 Market DWA6040 Equities Equities Commod. Allocation DWA6040 Commod. DWA6040 Equities DWA6040 Currency

-4.07% -6.82% 1.58% 15.26% 9.84% 3.65% 9.19% 6.25% -23.01% 20.07% 8.92% -0.14% 8.19% 2.07%

Strategic Strategic Strategic Foreign Foreign Money Money Int'l Foreign Foreign Int'l

Allocation Allocation Allocation Currency Currency Market DWA6040 Market Commod. DWA6040 Equities Currency Currency Equities

-4.58% -8.70% -7.72% 14.93% 6.27% 3.01% 7.79% 4.36% -27.05% 14.37% 8.69% -1.63% 1.97% 1.90%

Foreign US Foreign Strategic Foreign Foreign Strategic Fixed Fixed

Currency Equities DWA6040 Commod. DWA6040 DWA6040 Currency DWA6040 Allocation Currency Currency Allocation Income Income

-6.65% -11.77% -13.13% 11.32% 5.32% -1.96% 6.93% 3.61% -28.89% 8.93% 5.86% -4.67% 0.59% 1.19%

US Int'l Money Money Fixed Money US US Money Fixed Money

Equities Commod. Equities Market Market Income Market Equities Equities Market Income Commod. Market DWA6040

-8.03% -17.18% -14.95% 0.98% 1.40% -2.04% 4.74% 3.47% -37.81% 0.21% 2.14% -9.20% 0.09% 0.71%

Int'l Int'l US Fixed Fixed Foreign Fixed Fixed Int'l Fixed Money Int'l US

Equities Equities Equities Income Income Currency Income Income Equities Income Market Equities Commod. Equities

-15.31% -19.73% -22.53% -0.67% -0.39% -7.99% -0.70% 2.74% -43.48% -0.48% 0.16% -16.07% -3.64% 0.50%

Legend:

Tactical Allocation Inventory Strategic Allocation Inventory Weighting

Money Market DWA Money Market (MNYMKT) Vanguard Total Stock Market ETF (VTI)* 26.70%

Fixed Income Vanguard Total Bond Fund (BND) Vanguard MSCI EAFE ETF (VEA) 19.40%

Foreign Currency DWA Foreign Currency Index (DWAFXI) Vanguard MSCI Emerging Markets ETF (VWO) 10.40%

Commodity Greenhaven Commodity Fund (GCC) Vanguard REIT Index ETF (VNQ)* 7.30%

International Equities SPDR MSCI ACWIsm ex-US ETF (CWI) iPath Dow Jones-UBS Commodity Index ETN (DJP) 6.20%

US Equities iShares S&P 1500 Index (ITOT) Vanguard Total Bond Market ETF (BND) 30.00%

DWA 6040 Index (DWA6040) represents a daily rebalanced index of 60% S&P 500 Index (SPX) and 40% Vanguard Total Bond Index (BND)

* Prior to 2002, EUSA was substituted for VTI for hypothetical returns, and IYR was substituted for VNQ

$70,000

$90,000

$110,000

$130,000

$150,000

1/1/1999 1/1/2000 1/1/2001 1/1/2002 1/1/2003 1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012

Money Market

Strategic Allocation Portfolio (Risk Level 5)


The performance numbers herein are hypothetical price returns, based on the applicable index or fund, not inclusive of dividends, fees, or other expenses. Past performance not indicative of future results. Potential for profits accompanied by possibility of loss. Please see the final slide for important disclosures on hypothetical returns.


Mean Variance Optimization

Rinse … Wash …

Rebalance …

Source: wealthfront.com

Traditional Asset Allocation

Strategic Allocation Tactical Guidance&

Investors increasingly recognize the need for something more adaptive to changing markets …

But Tactical Guidance can be frustrating for advisors to implement within existing asset allocation platforms …

Until now …

Tactical Tilt

Tactical Tilt Methodology: You Can Have

Your Pie and Eat it Too


Tactical Tilt MethodologyApplying Tactical Investing to Strategic Targets

30

What the industry provides

What many

investors want.



Benchmark

40% Stocks /

60% Bonds

Benchmark

60% Stocks /

40% Bonds

Benchmark

80% Stocks /

20% Bonds

Commodity Domestic Eqty

Intl. Eqty Currency Fix Inc. Cash

MIN 0% 0% 0% 0% 40% 0%

MAX 10% 40% 20% 10% 80% 50%



MIN 0% 20% 5% 0% 20% 0%

MAX 10% 75% 25% 10% 60% 33%



MIN 0% 10% 10% 0% 10% 0%

MAX 20% 80% 30% 20% 40% 30%

Moderate

Tilt

Allocation

Conservative

Tilt

Allocation

Strategic

Targets

With

Tactical

Tilts

The “Tilt” allocation concept is about facilitating the

strategic allocation framework to succeed in a truly

tactical investment world.

Strategic Boundaries

Aggressive

Tilt

Allocation

Tactical Tilt & Strategic Boundaries


Moderate

Tilt

Allocation



MIN 0% 20% 5% 0% 20% 0%

MAX 10% 75% 25% 10% 60% 33%

Benchmark

60% Stocks /

40% Bonds

0%

10%

20%

30%

40%

50%

60%

70%

80%

Commodity DomesticEqty


MAX

MIN

Tactical Tilt Allocation Example: 10/24/2011

Tactical

Thresholds

Set By Risk

Category

Minimum

Weightings

are Allocated

Relative

Strength

Tactical

Weighting

then “Tilts”

the Allocation

Toward

Market

Leadership0%

20%

5%0%

20%

0%

0.0%

55.0%

0.0%0.0%

0.0%

0.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%



MAX

TILT

MIN

Tactical Tilt Asset Allocation: Offense (10/24/2011)

What

Does

Offense

Look

Like?


DALI Rankings: 6/8/08

DALI Rankings: 9/2/08

Source: The Economist, June 8th 2008

“Lehman”: 9/15/08


Moderate

Tilt

Allocation



MIN 0% 20% 5% 0% 20% 0%

MAX 10% 75% 25% 10% 60% 33%

Benchmark

60% Stocks /

40% Bonds

0%

10%

20%

30%

40%

50%

60%

70%

80%



MAX

MIN

0% 20% 5% 0% 20% 0%

10.0%

0.0%

0.0% 10.0%

2.0%

33.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%



MAX

TILT

MIN

Tactical Tilt Allocation Example: 9/2/2008

Tactical

Thresholds

Set By Risk

Category

Minimum

Weightings

are Allocated

Relative

Strength

Tactical

Weighting

then “Tilts”

the Allocation

Toward

Market

Leadership

Tactical Tilt Asset Allocation: Defense (9/2/2008)

What

Does

Defense

Look

Like?

35

Tactical “Tilting” remains focused upon Domestic Equities,

and “offense,” as it has since October 2011.


Current DALI Perspective (1/7/2013)

Moderate Tilt AllocationAggressive Tilt Allocation Conservative Tilt Allocation

Offense

Source: http://www.arrowfunds.com/files/DDF/Arrow_Insights_RS_Turns.pdf

A Time for RS Strategies


37

Return Data thru 12/31/2013Inception

DateYTD 2013 3 Yr Roll 5 Yr Roll

PowerShares DWA Technical Leaders (PDP) 3/1/2007 31.27% 55.89% 150.34%

S&P 500 Index (SPX) 29.60% 46.97% 104.63%

iShares Russell 1000 Index (IWB) 30.35% 47.68% 111.11%



PowerShares DWA Small Cap Technical Leaders Index (DWAS) 7/19/2012 49.83% 67.22% 173.21%

iShares Russell 2000 Index (IWM) 36.81% 47.44% 134.28%

AUM a/o 1/3/14: $627 million



PowerShares DWA Developed Markets Technical Leaders (PIZ) 12/28/2007 31.58% 19.64% 94.42%

iShares MSCI EAFE Index (EFA) 18.00% 15.24% 49.57%




PowerShares DWA Emerging Markets Technical Leaders Index (PIE) 12/28/2007 -2.26% -1.06% 93.08%

Vanguard MSCI Emerging Markets ETF (VWO) -7.61% -14.55% 74.54%


AUM a/o 1/3/14: $1.18 billion

The Power of Relative Strength


Returns prior to ETF inception date are based on a backtested performance of the applicable index and not inclusive of fees. The performance numbers above are pure price returns, not inclusive of dividends, or all transaction costs. Past performance not indicative of future results. Potential for profits accompanied by possibly of loss. Please see the final slide for important disclosures regarding backtested returns.


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DisclosuresUnless otherwise stated, the performance numbers herein are pure price returns, not inclusive of dividends, all fees or other transaction costs. Potential for profits is accompanied by possibility of loss. Past performance is not indicative of future results. You should consider this strategy’s investment objectives, risks, charges and expenses before investing. The examples and information presented do not take into consideration commissions, tax implications, or other transaction costs.

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This presentation does not attempt to examine all the facts and circumstances which may be relevant to any company, industry or security mentioned herein. We are not soliciting any action based on this document. The projections or other information in the attached document regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time. The outcomes in this document are based on historical market data and are presented to illustrate relationships between risk, time, and return. These outcomes cannot be relied upon in the face of changing market conditions, and should be re-evaluated frequently.

Some of the performance information presented is the result of back-tested performance. Back-tested performance is hypothetical (it does not reflect trading in actual accounts) and is provided for informational purposes to illustrate the effects of the relative strength strategy during a specific period. The relative strength strategy is NOT a guarantee. There may be times where all investments and strategies are unfavorable and depreciate in value. Relative Strength is a measure of price momentum based on historical price activity. Relative Strength is not predictive and there is no assurance that forecasts based on relative strength can be relied upon.Back-tested performance results have certain limitations. Such results do not represent the impact of material economic and market factors might have on an investment advisor’s decision making process if the advisor were actually managing client money. Back-testing performance also differs from actual performance because it is achieved through retroactive application of a model investment methodology designed with the benefit of hindsight. FIRM believes the data used in the testing to be from credible, reliable sources, however; FIRM makes no representation or warranties of any kind as to the accuracy of such data. All available data representing the full platform of investment options is used for testing purposes.

The information contained herein has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable (“information providers”). However, such information has not been verified by Dorsey, Wright & Associates, LLC (DWA) or the information provider and DWA and the information providers make no representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein. DWA and the information provider accept no liability to the recipient whatsoever whether in contract, in tort, for negligence, or otherwise for any direct, indirect, consequential, or special loss of any kind arising out of the use of this document or its contents or of the recipient relying on any such recommendation or information (except insofar as any statutory liability cannot be excluded). Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice. Neither the information nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products. This document does not purport to be complete description of the securities or commodities, markets or developments to which reference is made.

Each investor should carefully consider the investment objectives, risks and expenses of any Exchange-Traded Fund ("ETF") prior to investing. Before investing in an ETF investors should obtain and carefully read the relevant prospectus and documents the issuer has filed with the SEC. To obtain more complete information about the product the documents are publicly available for free via EDGAR on the SEC website (http://www.sec.gov).


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