Lockwood AdvisorFlex Portfolios

Lockwood AdvisorFlex Portfolios™

MUTUAL FUND/EXCHANGE-TRADED FUND MANAGED ACCOUNTS

For Financial Professional Use Only—Not for Public Distribution


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The Best of Both Worlds We understand that while most of your clients require an individual approach and unique investment strategy, the time commitment needed to achieve this may put a strain on your resources and the growth of your business. Lockwood Advisors, Inc. (Lockwood) seeks to address this challenge by offering a managed account solution with the option to customize certain investment selections. This is designed to enable you to leverage the expertise of Lockwood paired with your knowledge of your clients’ specific goals and objectives—delivering what we believe to be the best of both worlds.

Introducing Lockwood AdvisorFlex PortfoliosTM

Lockwood AdvisorFlex Portfolios (AdvisorFlex) is designed to provide you with the flexibility and control you are looking for in a managed account to help meet your clients’ unique needs.

Lockwood believes that optimal portfolios should reflect clients’ long-term objectives, rather than adjust to capitalize on short-term market trends. AdvisorFlex allows you to choose from 16 model portfolios across three main investment strategies, intended to align with specific objectives typically associated with clients who are in the wealth accumulation, transition or distribution phases of their lives.

Lockwood Advisors, Inc.

Lockwood has a proud history of leadership and innovation that is firmly grounded in independent, unbiased investment research. With over 120 years of combined experience, the team is dedicated to helping financial advisors implement thoughtful, deliberate investment solutions for their clients through every stage of the investor life cycle. From our roots in money manager research, Lockwood has evolved to offer multiple fee-based advisory solutions—all grounded by the same disciplined investment philosophy. Our offerings are designed to give you the choice and flexibility you need to address each client’s unique objectives—and your own personal approach to portfolio construction.


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A Powerful Combination of Our Best Thinking and YoursAdvisorFlex is designed to provide you with choice and flexibility in both portfolio construction and investment selection. You can select a predefined portfolio that reflects Lockwood’s professional expertise, or you can elect to rely on your own experience and knowledge by making investment selections from an extensive list of mutual funds, exchange-traded funds (ETFs) and exchange-traded notes (ETNs) that have been selected by Lockwood.

AdvisorFlex offers many important features:

> Diversification. Access a broad spectrum of asset classes through a single portfolio of mutual funds, ETFs and ETNs.

> Customization. Choose from a wide range of models and investment selections intended to better align the portfolios with your clients’ diverse investment objectives and needs.

> Flexibility. Implement Lockwood’s predefined portfolios or build portfolios from a list of selections provided by Lockwood.

> Tax efficiency. Enter tax-selling requests based on your clients’ specific needs and circumstances.



Multiple Solutions—One Disciplined ProcessLockwood seeks to construct portfolios consistent with your clients’ life stages by using asset classes and investment selections that have characteristics similar to the objectives of those life stages.

Portfolios designed to meet your clients’ objectives

AdvisorFlex is designed to enable you to implement thoughtful, deliberate investment strategies for your clients, while leveraging Lockwood’s proprietary research and independent investment expertise, through a five-step, consultative investment process:

1. Complete investment profile

2. Select asset allocation strategy based on your client’s investment profile

3. Choose a portfolio predefined by Lockwood, or build your own portfolio by choosing from a broad list of investments that have been provided by Lockwood

4. Regular monitoring and periodic rebalancing of the portfolio by Lockwood to help ensure it remains within the portfolio’s objectives

5. Provide risk management and investment oversight on three levels: Lockwood’s review, monitoring and objective investment research; the underlying fund managers’ investment expertise; and your professional oversight


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AdvisorFlex—Designed for Your SuccessIn addition to flexibility, customization and objectives-based asset allocation strategies, AdvisorFlex offers other useful features that may benefit you and your clients.

Research tools from Morningstar, Inc. (Morningstar)

Lockwood’s partnership with Morningstar provides you with access to the Morningstar® Site BuilderSM Portfolio Analysis and Morningstar® Site BuilderSM Snapshot reports. These reports are designed to help you analyze and customize the portfolios and provide your clients with a greater understanding of their investment choices.

Portfolio design support

You can also tap into a team of Lockwood associates who can assist you in researching the investment options available in AdvisorFlex and in creating a strategic plan to migrate your clients’ current assets into the program.

Integrated account management tools

You can leverage Lockwood’s web-based proposal, account management and reporting tools to help streamline account administration and client communications.

Grow your fee-based business

AdvisorFlex offers what we believe are many potential benefits for today’s investors, which may make sense for your clients. For more information on AdvisorFlex, please call the Lockwood Business Development Team at (800) 200-3033, option 2, or visit us on the web at www.lockwoodadvisors.com.


Lockwood AdvisorFlex Portfolios Guidelines*

Account Type – Mutual fund/ETF managed account

Who Can Offer AdvisorFlex?

– Registered investment advisors (RIAs) and properly registered broker-dealer representatives (with broker-dealer/RIA approval)

Number of Portfolio Holdings

– Portfolios typically hold 10–15 investments (mutual funds, ETFs and/or ETNs)– Over 130 investments, including over 65 mutual funds and over 65 ETFs across 19 different styles,

are available for selection as of October 31, 2009

Financial Advisor Fee Revenue

– The financial advisor charges a fee, per his or her standard fee schedule– The fee is deducted from the account each quarter and distributed to the authorized party– The fee collected from the client will include the advisor and program fee (see below)

Program Fee*

– The program fee includes the Lockwood research and advisory fee, as well as the fee for clearing, custody and execution

– Additional expenses associated with the underlying investment vehicles (e.g., mutual fund redemption fees, 12b-1 fees, internal expense ratios, etc.) may apply (please refer to the applicable investment vehicle prospectus for additional information)

– Clients are billed quarterly in advance

Householding

– AdvisorFlex accounts can be householded together for billing purposes, subject to standard householding rules

Note: Employee Retirement Income Security Act (ERISA) accounts cannot be combined with individual or personal accounts for billing purposes

Account Funding and Contributions

– The initial investment minimum is $50,000 – The subsequent contribution minimum is $1,000– For conversions of existing mutual fund wrap business, please contact the Lockwood Business

Development Team by calling (800) 200-3033, option 2

Contribution Types

– Accounts can be funded with cash equivalents and mutual fund shares (same share class) or ETFs that are part of the client’s selected AdvisorFlex model

– Non-model securities cannot be retained in AdvisorFlex accounts and should be liquidated prior to funding, if possible

– Lockwood retains the right to liquidate or refuse any non-model securities

Performance Reporting– Consolidated quarterly and on-demand performance reporting is available online through the

Lockwood Advisor WorkstationTM and will be integrated in Pershing’s NetX360TM, allowing you to view your fee-based advisory and brokerage accounts through a single platform

Advisor Support

The following communications are available to financial advisors: – Portfolio alerts on asset allocation and investment changes– Quarterly model performance reviews– Market commentaries and regular conference calls

Client Communications Your clients will receive: – Monthly statements from the custodian– Performance report distributed through the advisor

* Please refer to Lockwood’s Form ADV Part II, Schedule H, disclosure document for more information.


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Important Disclosures

The statements contained herein are based upon the opinions of Lockwood Advisors, Inc. (Lockwood) and the data available at the time of publication and are subject to change at any time without notice. This communication does not constitute investment advice and is for informational purposes only, is not intended to meet the objectives or suitability requirements of any specific individual or account, and does not provide a guarantee that the investment objective of each model will be met. An investor should assess his or her own investment needs based on his or her own financial circumstances and investment objectives. Neither the information nor any opinions expressed herein should be construed as a solicitation or a recommendation by Lockwood or its affiliates to buy or sell any securities or investments. It is important to remember that there are risks inherent in any investment and that there is no assurance that any money manager, asset class, style or index will provide positive performance over time. The investment return and principal value of an investment will fluctuate, so that investment values, when redeemed, may be worth more or less than their original cost. Diversification and strategic asset allocation do not guarantee a profit nor protect against a loss in declining markets. Past performance is not a guarantee of future results.

Lockwood AdvisorFlex Portfolios (AdvisorFlex) contains open-end mutual funds and/or exchange-traded funds (ETFs). ETFs are investment vehicles that are legally classified as open-end companies or unit investment trusts (UITs), but differ from traditional open-end companies or UITs. ETF shares are bought and sold at market price (not NAV) and are not individually redeemed from the fund. Shares of certain ETFs have no or limited voting rights. ETFs are subject to risks similar to those of stocks.

Investment vehicles may include exchange-traded notes (ETNs). ETNs are a type of senior, unsecured, unsubordinated debt security of the issuing company. This type of debt security differs from other types of bonds and notes because ETN returns are based upon the performance of a market index minus applicable fees, no periodic coupon payments are distributed and no principal protection exists. Similar to ETFs, ETNs are generally traded on a securities exchange. Investors can also hold the debt security until maturity. At that time, the issuer is obligated to give the investor a cash amount that would be equal to the principal amount times the applicable index factor less investor fees. The index factor on any given day is a mathematical equation equal to the closing value of the underlying index on that day divided by the initial index level. The initial index level is the closing value of the underlying index on the creation/inception date of the note. One significant risk factor that affects an ETN’s value is the credit of the issuer. ETNs are synthetic investment products that do not represent ownership of the securities of the indices they track, and are backed only by the issuer’s credit. Another significant risk factor affecting ETNs is liquidity. Upon issuance, the ETNs may not have an established trading market. There is no assurance that a trading market for the notes will develop, or, if one develops, that it will be maintained. Although the issuers of the notes may apply to list certain issuances of notes on a national securities exchange, the notes may not meet the requirements. Additional risks of investing in ETNs include limited portfolio diversification, price fluctuations, issuer default, uncertain principal repayment and uncertain federal income tax treatment. Clients should consult their tax advisor regarding tax treatment. Investing in ETNs is not equivalent to a direct investment in an index or index components.

Investors should carefully consider the investment objectives, risks, charges, fees and expenses of any mutual fund, ETF or ETN before investing. This and other important information can be found in the fund/note prospectus, which may be obtained by calling the fund/issuer or by visiting the fund’s/issuer’s website. Please read each fund’s/note’s prospectus carefully before investing.

Mutual funds, ETFs and ETNs included in AdvisorFlex may charge additional fees and expenses in addition to the program fee charged by Lockwood for this product. Mutual funds may also charge a redemption fee if shares are redeemed within a period of time as specified in the fund’s prospectus. The amount of the redemption fee, as well as the minimum holding period, is disclosed in the respective fund’s prospectus. For complete details, please refer to the applicable fund prospectus.

Mutual funds, ETFs and ETNs included in AdvisorFlex may use derivatives that are often more volatile than other investments and may magnify the fund’s gains or losses. An investment that uses derivatives could be negatively affected if the change in the market value of its securities fails to correlate adequately with the values of the derivatives it purchased or sold. Investors considering these types of investments should have a long-term investment horizon.

Certain ETFs utilized by AdvisorFlex have elected to be treated as partnerships for federal, state and local income tax purposes. Accordingly, investors in such ETFs will be taxed as a beneficial owner of an interest in a partnership. Tax information for such ETFs will be reported to investors on an IRS Schedule K-1. Investors should consult their tax advisors in determining the tax consequences of any investment, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.

Lockwood serves as the money manager with respect to AdvisorFlex and is responsible for developing and providing asset allocation strategies and investment selections for each asset class. Lockwood periodically reviews the asset allocation strategies and investment selections for adherence to the investment objective. Lockwood exercises limited discretion in order to implement certain model updates, which may include changes to the asset and style allocation and/or the replacement of investment vehicles. Lockwood, in its sole discretion, may rebalance a client account in such instances as are believed to be or determined by Lockwood to be in the client’s best interests. Lockwood reviews each account’s drift from the selected model on a regular basis and rebalances a client account as circumstances warrant.

Lockwood personnel may be invested in any of the AdvisorFlex models available; however, Lockwood has adopted a Code of Ethics, which addresses perceived or real conflicts between the trading activity on behalf of investors and the trading activity of Lockwood employees. Monitoring of this activity is continuous and ongoing and designed to prevent an employee from reaping any benefit or unfair advantage over an investor with respect to such trading activity.

For more information about Lockwood, as well as its products, fees and services, please refer to the ADV Part II, Schedule H, which may be obtained by writing to Lockwood at the following address: 10 Valley Stream Parkway, Malvern, PA 19355, or by calling (800) 200-3033.

Lockwood Advisors, Inc. is an SEC Registered Investment Adviser and an affiliate of Pershing LLC, each subsidiaries of The Bank of New York Mellon Corporation. Pershing LLC, member FINRA, NYSE, SIPC.

PSB-LKA-AFLEX-11-09 For Financial Professional Use Only—Not for Public Distribution

About Us

Lockwood Advisors, Inc. (Lockwood) is a leading provider of fee-based managed account solutions to financial institutions and

registered investment advisors. As a program sponsor, Lockwood offers access to some of the industry’s leading investment

managers, provides independent research on separate account managers, and develops advisory solutions to help investment

professionals meet the diverse needs of their investor clients. Lockwood Advisors, Inc. is an SEC Registered Investment Adviser

and an affiliate of Pershing LLC, both BNY Mellon companies. Pershing LLC, member FINRA, NYSE, SIPC.

Lockwood AdvisorFlex Portfolios

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