1. System Name: Tortoise ETF 2.0 ETF system ver 1.4 Oct 01, 2011

2. System description:

a. An intermediate to long-term system, with a few simple rules that can be operated with weekly prices that seeks to keep money invested wherever gains are being made in the world markets.

b. This system remains 100% invested unless all regions of the world market are declining, at which point it increments money to cash to wait out the storm.

c. This system spends most of time fully invested in bull markets, in the strongest sectors.

3. System logic, concepts and definitions:

a. The system considers over 500 Exchange Traded Funds (ETFs) of various types: broad indices, regional indices, country specific indices, Morningstar-style ETFs, ETFs oriented towards capitalization size, growth vs value style, and market/business sectors than can be defined either broadly or narrowly.

b. Core beliefs of this system:i. Price is the only clear indicator of information from the market, and that all predictions and

forecasts are opinions, and therefore t least one step removed from objectivity. ii. ETFs in the same asset class (or region, or market segment) tend to have similar performance

characteristicsiii. Asset allocation decisions account for the vast majority of portfolio performance, and that

manager discretion and skill contributes a small fraction to performance; therefore getting the asset allocation decision made effectively deserves by far the most attention in the investment process.

iv. Institutional money moves the market as it cycles in search of return, repositions to protect profits and hedges against uncertainty.

v. The size and tactics of institutional money establishes price patterns and signals that offer opportunities for smaller size, more agile individual investors to make favorable moves when they operate on a weekly basis

c. General methodology:i. We will assess performance of the mini-universe of ETFs in 3 dimensions: Strength, Consistency

and Volatility, with measurements that derive from price and % rate of return over various time-periods in order to make fact based judgments.

ii. We will array the performance of each ETF on a scale from 0-100 on each dimension by comparing its performance to each of the other ETFS in order to make a consistent, and easily understood ranking.

iii. We will examine multiple time periods to avoid being driven by daily fluctuations.iv. We will review and be prepared to act on a weekly basis in order to reposition in time to account

for changes in the market created by the movement of institutional money.v. We will analyze and act on weekends when the market is closed in order to avoid the emotional

reactions to current market activity in the moment.vi. We will prefer the ETFs that are outperforming in all 3 dimensions

vii. We will maintain a portfolio of the strongest, most consistent and least volatile ETFsviii. We will seek a portfolio of 8-10 ETFs to strike the best balance between diversification and

focus.ix. We will employ disciplined rules for position sizing, entries, and exits to help manage riskx. We will focus on the best ETFs in the best sectors in the best regions, so that we stay in the world

market where money is being made. However, when all ETFs in the world market model are weak (defined as below the Moving Average filter), we will not exceed our targeted asset allocation limits. We will not add money back into the market until we see at least 1 of the regional ETFs positive compared to the MA filter.

xi. The asset allocation model will be based off of 10 broad liquid indices correlating to the world market; 40% of the weighting comes from US indices.

d. Technical components:

i. Strength (STR): we will use a blend of 3 month and 6 month Relative Strength (RS) to measure current Strength. We’ll calculate the % performance for 2 look-back periods and blend them with a weighted average. We’ll compare this performance against all other ETFs, and rank them all on a scale of 0-100.

ii. Consistency (CON): we’ll use a weighted average of the STR scores of the last 10 weeks, and rank each ETF on a scale of 0-100. This measurement rewards ETFs that have been among the leaders the previous 10 weeks, and guards us against choosing funds which have been mediocre or poor but have turned in a phenomenal 1 week performance. Strong consistency scores reflect ETFs that are benefiting from an exceptional trend in the world market which may have a better chance of enduring going forward than ETFs which are 1 week wonders.

iii. Quality (QUAL): we will use a “System Quality number for performance over the last 40 weeks, and then rank all ETFs on a scale of 0-100. We prefer those ETFs that have earned their gains with a minimum of volatility. This measurement causes us to favor powerful, smooth and steady moves upward, all other things being equal.

iv. Average score (AVG): we will average the 3 individual scores STR, CON, QUAL, and rank ETFs from best to worst.

v. Moving average filter: a simple calculation to determine if the ETF is above or below the 4 month MA (default). If Price > MA(4 month) we get a Buy signal. If Price < MA(4 month) we get a Cash signal.

vi. Weekly RSI: another handy rule of thumb technical indicator for traders concerned about markets/ETFs that are getting over extended to the upside. Weekly RSI does not often rise above 70, and will normally only do so after a long, extended run. It is an optional rule (discussed below) to look to preserve profits when your positions get to this condition. It is another optional rule to not enter new positions if the ETF is already extended to this level. On the flip side, really powerful mega-moves in the market can remain at extended levels for considerable periods, particularly if the ETF is emerging from a multi-year bear cycle.

vii. Liquidity: we will examine 500+ ETFs for trend identification and ranking, but will restrict positions to those with average daily volume > 100,000 shares (to allow for size)

4. Targetted ETFs: (all available ETFs will be analyzed and considered) Examplesa. Regional sectors of the world market: SPY, EWJ, EFA, ILF, EPP, EEM, EZU.b. Country specific ETFs: example: EWA, EWC, EWW, EWY, EWT, EWPc. Morningstar style specific ETFs: examples Wisdomtree, and Powershares family of ETFsd. Business sector-specific ETFs: examples: IGW, BBH, PPH, XLB, XLK

5. Historical performance: In prototyping, the ETF system has performed better than the benchmark S&P 500 index over long periods of time. It is modeled after a mutual fund switching system that follows the same concept and uses the same measurements over a mutual fund database of 2000 no load, no transfer fee mutual funds which has outperformed the S&P 500 every year since 1999 when first implemented. The ETF system replaced the mutual fund system when trading rules changed. This model was flat in 2008, when the broad market lost >40%. When the market lost an additional 40% early in 2009, this model had a loss of 5%. When the market rebounded and broke even on 4 May 2009, this model was up 8%.

6.

Results over the life of the model:

For 2005-2007:

7. Entry rules/Asset allocation considerations:

a. ETFs with a “Buy” signal are ownable. ETFs with a “Cash” signal are not ownable.b. Start your selection process from the top of the list using the Average (AVG) score (simply the average of

all 3 ratings)c. Do not exceed 20% of your portfolio in any single positiond. Do not exceed 40% in any region of the world market model (with the exception of the US market)e. Do not buy positions with a “Cash” signalf. When all the large regional indices have a “Cash” signal, historically it has been a good idea to be on the

sidelinesg. Use this table to decide on asset allocation target for the week ahead:

# of regions red: % invested 0: 100% 1: 90% 2: 80% 3: 70% 4: 60% 5: 50% 6: 40% 7: 30%8: 20%9: 10%10: 0%

8. Exit rules:a. Trail the position with a 10% trailing stop and the MA(4 mo) stop.b. Exit the position if the Strength rating goes below that of the ETF database average; (STR will be coded

Yellow) c. Exiting trades will generate cash which should be maintained as cash until the next set of weekly reports

comes out 9. Re-entry rules:

a. If you exit a position and then it finds its way back on the list of ownable funds, do not re-enter within 30 days of your last exit.

10. Position sizing rules:a. Maximum 10 positionsb. Maximum of 20% of capital in any single indexc. Buy in equal dollar amounts

11. Preferred brokers: low cost transaction per share is important for this system. If you are an intraday trader trying for more, then consider slippage and speed of execution as well. Any large deep discount broker should satisfy these requirements.

12. How to start the port folio from all cash :

a. Paper trade this for 3 months or until you are comfortable with the number and type of signals you receive, and that you are comfortable that you can respond to the signals and set the buy/sell orders and trailing stops.

b. Consider trading at a reduced equity size with real money at a deep discount broker in order to build confidence and professionalism with real money before increasing size.

c. To get started, divide your money into 10 equal piles, and buy the 2 best positions for 5 weeks in a row until fully invested. This will give you a blended entry, smoothed over 5 weeks, and will prevent you from buying the top of the recent trend all in one week.

13. Weekly routine:a. Is there anything I should sell?

i. Have any stop loss orders been hit during the week?ii. Did any stop loss orders NOT get triggered that should have? (this is an anomaly that

must be taken up with your broker)

iii. Do I need to scale back any winning position that has exceeded the 20% of portfolio exposure rule?

iv. Are any positions giving a “Cash” signal but haven’t hit the 10% trailing stop? If so, sell at the open next market open.

v. Calculate the asset allocation for the model as a guide for allowing new positionsb. Is there anything I should buy?

i. Do I have cash available in the account?ii. Does the recommended market exposure allow me to buy?

iii. What’s the best ETF I can buy that does not violate any of the portfolio asset allocation rules?

iv. Enter the trade at next market open..

14. Discretionary considerations:a. To reduce volatility, you could elect to take only the US index signalsb. To reduce volatility, you could elect to not take signals when price is within 2% of the index’s 200 day

MA, since there is more whipsawing when the long term trend is not fully established.c. If you have winning trades that are larger than 20% of your portfolio, you could elect to retain the larger

position, but tighten your stop so that your exit point , if hit, still represents a 2% loss to overall capital. (a 10% trailing stop on a position that is 20% of your portfolio represents a 2% level of risk to your portfolio for that individual position)

d. When the weekly RSI of your position is >70, your ETF is usually at multiyear highs, and you might consider profit preservation strategies like tightening up your stops, or taking a partial profit to lock in gains.

e. When the weekly RSI of the ETF under consideration as a new position is > 70, you could elect to not take a position, or to trade it at ½ of your normal position on the concern that the ETF may already be overextended.

f. Intraday traders could elect to try to improve intraday entries and exits through the use of pivot points or other intraday indicators

g. Aggressive traders could elect to use leveraged indices to get more volatility out of each tradeh. Futures traders could use these ETF signals as signals to be implemented in the futures marketsi. In Bear markets, the portfolio generally moves all or most to cash, but you will see short side funds,

commodity ETFs, bond ETFs or specialty funds with buy signals and you may elect to own those using the same rules as long side or normal funds. My personal strategy is to reduce position size, and monitor these funds on a daily basis and harvest outsize moves rather than waiting for stops to be hit. My beliefs are that the short side moves are fundamentally different than long side, and that an adjustment to exit rules are warranted.

15. Report data elements:

Here is a sample report from 8 Oct 2011:1. ETF Regional report summary:

ETF database statistical summary:

2. Top ETFs:

3. Model portfolio: beginning with a notional $100k account on Jan 5, 2009

1. Portfolio target exposure and actions: Target portfolio ‘s theoretical exposure is 0% exposed and 100% cash, with 0/10 regional indices on buy signals on the MA filter. Trust and monitor the stops

a. Selling: b. Buying: c. Notes:

2. Summary of Stops: Last week: This week: