Proprietary and Confidential

UMA Trading Subcommittee

July, 2012

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Table of Contents

Overview

Trading Process for UMA UMA Investment Roles UMA Messages © Kurt Salmon 2011

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Overview

The following slides are based upon the discussions during the MASS UMA Trading Sub committee meeting of June 22, 2012. They are intended to capture the sense of the discussion and to serve as documentation of key concepts for use as references for subsequent discussions. Additions and amendments are invited.

The objective of the meeting was to identify the types of messages and communication between money manager and sponsor to facilitate UMA programs. The following areas are offered to clarify discussions:

Trading Process for UMA

The trading process for UMA’s is distinct from that of SMA’s. Additional processes for hybrid UMA’s, those with mutual funds or assets requiring different trade and/or data flows should be developed. Points in the processes where messages should be exchanged are suggested.

UMA Investment Roles

The responsibilities of each role differs depending upon the structure of the UMA program and are presented by type of UMA.

UMA Messages

An initial list of UMA messages organized by business process is presented.

© Kurt Salmon 2012

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Trading Process for Models-Only UMA

Manager Sponsor of Program 1 • Model Updated by Manager •

Model Routed to Program 1

•

Model modified and returned to Program 1

•

Model Routed to Program 2

•

Model Routed to Program 3

•

Model Received and Acknowledged

• Model Reviewed • Model Accepted or

Returned for Modification

• Model loaded into Rebalancing System • • Orders routed for trading • Executions returned •

Model used to generate orders Allocations to accounts (AUM affected)

Sponsor of Program 2 Sponsor of Program 3 Highlighted text indicates a possible message.

UMA Investment Roles

Type of Program Models-Only UMA Passive Hybrid SMA Manager (1) (2) Models-Only UMA Active

Create/ Maintain Model Create/ Maintain Model - Create/ Maintain Model - Create Orders - Trade Away (3) - Create Orders - Trade Away - Route for trading, managing release - Manage Allocation (1) - A manager may participate in multiple programs with multiple styles at the same or several sponsors (2) - An advisor can provide models or portfolio management functions within a UMA program, as allowed (3) - Models may be created, but are used to create orders, not for distribution. The same models used for an SMA may well be distributed for UMA programs

Overlay Trading

- Review and approve models - Modify models or incorporate into an overall model - Generate orders and adjust orders for restrictions, wash sales, etc.

- Route for trading, managing release - Manage Allocation - Receive orders - Place trades - Pursue best execution - Process execution - Inform Overlay - Process models using technology without modification - Receive Orders and route for trading - Receive completed trades done away - also functions for Models-Only programs - Potentially could referee among SMA managers for a common client - Could be performed by the Advisor - Receive orders - Place trades - Pursue best execution - Process execution - Inform Overlay - Receive orders - Place trades - Pursue best execution - Process execution - Inform Overlay / Clearing Broker for away trades - Receive orders - Place trades - Pursue best execution - Process execution - Inform Overlay / Clearing Broker for away trades

UMA Messages

Model-related •Model enclosed – Manager to Sponsor •Model received – Sponsor to Manager •Model approved – Sponsor to Manager •Model not approved – Sponsor to Manager •Model implemented for next rebalance •Changes to model used to generate orders (not full rebalance) •Substitution security •Corporate Action instructions: apply to accounts and models Trading-related •Orders generated day/time for model •Orders executed day/time for model •Orders open (not executed) end-of-day •Trading instructions (limit, portion out trade, etc.) – Manager to Trader •Amend order – not executed – Manager/ Overlay to Trader •Order modified – Overlay to Manager Special Requests •Allocation change: raise/use cash •Generate gains/losses •Other Manager Status •Manager Style available •Manager Style on hold •Manager Style cancelled Performance •Assets Under Management – end of month •Return – end of month •Number of Accounts Marketing •Request investment commentary •Programs/Products where model/style is in use

Contacts

R. Scott Quade Manager 650 Fifth Avenue 30 th Floor New York, NY 10019 Mobile: +1 201 927 7673 Fax: +1 212 521 0201 [email protected]

www.kurtsalmon.com

Kurt Salmon, 650 Fifth Avenue, 30 th Floor New York, NY, 10019, USA P +1 212 521 0221 F +1 212 319 9476

www.kurtsalmon.com

© Kurt Salmon 2012

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