This document describes the investment strategy of JMS Partners, a management group. They take a concentrated equity approach investing in 10-15 stocks, and use derivatives to provide downside protection. They have developed proprietary software that analyzes market data and correlates variables to identify statistically anomalous stocks and relationships. The software profiles stocks based on probability and mean reversion theory to select investments with the highest probability of success. Their strategy aims to generate superior risk-adjusted returns through a collaborative, multi-disciplinary approach combining fundamental analysis, derivatives hedging, and quantitative modeling.

1. JMS PARTNERS
Management Group
Matthew Stephenson, CFA
James Stephenson, Ph.D.

2. Why the Stock Market?
The Opportunity Facing Equity Investors
 Stock prices tend to advance more than twice as often as
they decline, as measured by the S&P 500 over the last
190 years.
 Liquidity. No ‘lock-up’ or minimum holding period –
buyers and sellers can transact as much and as quickly as
they like1.
 Long-term, equity returns outperform all other
investment vehicles - bonds, real estate, etc. – both on
risk- and inflation-adjusted bases.
 Equities are considered to offer protection against
inflation. The government’s current stimulus efforts
increase the potential of an inflationary environment in
the near-term.
1. Excludes restricted shares and shares of companies with extremely low daily volume of shares
traded.

3. 2014
2012
1895 2010
1894 2007 1909
1892 2005 1905 2006
1889 1994 1900 2004
1888 1993 1899 1992
2015 1882 1987 1897 1988
2011 1881 1984 1886 1982 2013
1910 2000 1875 1978 1878 1979 1951 2009
1890 1990 1871 1970 1874 1971 1950 2003
1887 1981 1870 1956 1872 1968 1943 1999
1883 1977 1869 1953 1864 1965 1925 1998
1877 1966 1867 1948 1858 1964 1924 1996
1873 1862 1866 1947 1855 1959 1922 1991
1884 2001 1861 1960 1865 1939 1850 1952 1918 1986
1876 1973 1860 1957 1859 1923 1849 1949 1901 1983 1945 1997
1854 1969 1853 1946 1856 1916 1848 1944 1898 1980 1936 1995
1841 1941 1851 1940 1844 1912 1847 1942 1891 1976 1928 1989
2002 1837 1932 1845 1934 1842 1911 1838 1938 1885 1972 1927 1985
1907 1974 1831 1920 1835 1929 1840 1906 1834 1926 1880 1967 1915 1975 1879 1954
1857 1930 1828 1903 1833 1914 1836 1902 1832 1921 1852 1963 1904 1958 1863 1935
1931 1937 2008 1839 1917 1825 1893 1827 1913 1826 1896 1829 1919 1846 1961 1830 1955 1843 1908 1862 1933
Source: Standard and Poor's, Ibbotson, Robert Shiller.
Historically, equity markets go up more than they go down.
20% 40% 50% 60%-50% -30% -20% -10%
29.5% of the
time
30%-40% 0%
S&P 500 CALENDAR YEAR STOCK RETURNS (1825 - 2015)
70.5% of the
time
10%

4. Why JMS Partners?
Adapting Through Innovation
 The equity market is an ever-changing, evolving
machine. Constant innovation must be part of a winning
investment strategy. A static investment philosophy –
even a great one – will fail eventually.
 After watching even the ‘safest’ core, blue chip stock
prices gap down (i.e. GE) in 2008-09, equity investors
must now look for an innovative, unique investment
strategy: one that not only expects a dynamic market
going forward, but actively prepares for it in order to
manage risk.
 JMS focuses on an absolute return strategy, versus a
relative return strategy. Losses or drawdowns are
unacceptable, regardless of what the indices do.
 A comprehensive, multi-faceted investment strategy can
dramatically exceed typical equity returns - and do so
with less risk, thanks to advanced mathematics.

5. The JMS Objective
Generate & Protect Superior Returns Using
a Collaborative Investment Discipline
 Component 1: A time-tested, fundamental
investment philosophy - incorporating public
equities in a concentrated strategy.
 Component 2: Derivatives (options, futures, ETF
contracts) to 1) establish downside protection for
the portfolio, and 2) create additional yield from
erratic market trading patterns. We have
developed strategies that can and will provide
return no matter which direction the market
trends.
 Component 3: A proprietary, software system
based on probabilistic data analysis, which
substantially increases the confidence level
associated with every trade.

6. Portfolio Management - Equities
Concentrated Fund Invested in Best Ideas Only
 A concentrated strategy of 10 to 15 stocks - only our best ideas
are working for our clients. This compares to the average 100+
held by mutual funds.
 Cash flow, valuation, and earnings models, as well as the
company’s analysis system will be utilized simultaneously to
determine a firm’s probabilistic return profile.
 No buy-and-hold strategy. Stocks are given time to perform, but
are replaced quickly if better ideas exist or if their appreciation
profile deteriorates.
 In the event of an overvalued market, derivatives will assume a
greater role in the portfolio (i.e. writing put options on names we
like, at reasonable strike price levels).

7. 10
11
12
13
14
15
16
1 2 9 10
% p.a.
Raw returns by portfolio concentration decile (10=high concentration)
Why Be
Concentrated?
Over the period 1979-2003, those
funds running the highest degree of
portfolio concentration outperformed
those with the most diversification by
3% p.a.
-2
-1
0
1
2
3
4
1 2 9 10
unds with
tion outp
fication
terms
Risk adjusted returns by portfolio concentration decile (10=high concentration)
% p.a.
Source: Baks et al (2006), Dresdner Kleinwort Macro research
With Less Risk.
Greater Returns…

8. Portfolio Management - Derivatives
Provide Downside Protection & Potential
Incremental Yield
 Key to any successful investment discipline is a sound downside protection strategy.
 Within the JMS portfolio, options, futures and/or ETF’s with high negative
correlations to the underlying holdings are employed to provide a safety net to the
Fund in the event of a sell-off.
 These hedges will be cost-effective as significantly out-of-the-money derivatives will
be purchased. Quantity is determined by stock volatility.
 Portfolio losses will be greatly mitigated, if not completely outweighed by
corresponding derivative gains.
 Derivative gains/losses exhibit much more of an exponential pattern - versus the
linear movement of stock prices.
 Relative to the majority of other funds, JMS will show superiority in the conservation
of capital gains realized over time.
 The resulting JMS portfolio will consist of some of the most quality and undervalued
domestic stocks, coupled with a substantial hedge against a specific stock or general
market downturn.

9. A Simplified Example
With Proper Hedging in Place, Derivative Protection
can Protect AND Add Yield to a Portfolio
-5
0
5
10
15
20
25
30
35
40
$
Portfolio Value Stock Value Derivative Value
 Stock loss from peak - 59%
 Gain on derivative from stock’s loss - 3500%
Stock Loss
Derivative Gain

10. Portfolio Management - Software
Stock Profiler Based on Probability & Correlation
 After ten years of development, JMS's system automatically maps and
correlates any number of market variables to constantly illustrate normal
or mean relationships between them.
 Given that we can learn the average relationship between any two or more
metrics or data points, over any given historical period, we can determine
which relationships are statistically skewed right now.
 The greater the current distance from the mean (std dev), the greater the
interest placed on the metric/relationship.
 Stocks (and derivatives) are profiled and suggested based on the concept of
mean reversion; incorporating any strategy set forth by the user - technical,
momentum and/or fundamental patterns.
 Speed of information is just as important as the quality of the information.
The system has an 8-node parallel computing engine that independently
performs the data analysis.

11. Average or Mean Occurrence
Metric Values
Metric
Value
Frequency
Standard Deviation
68% of Occurrences
95% of Occurrences
99% of Occurrences
Absent any peculiar
or extenuating
circumstance for the
deviation, a metric
value becomes
increasingly
interesting the further
it lies from the mean
metric value.
This is due to Mean
Reversion Theory -
the idea that metric
values will eventually
return to their mean
or average value,
absent any rational
data that might cause
such a deviation.
Only 1% of all
occurrences lie
outside of three
standard deviations
from the mean.
High Interest Values
The Probability Curve & Mean Reversion Theory

12. Key To Success
Buying Right is More Common; Selling Right is Rare
 Good stock picking is always a must, but particularly during an upward
trending market. Our portfolio stocks should produce impressive returns on
their own merit, given the intensive, collaborative due diligence process.
 However, there are literally an infinite number of reasons why a stock price
may be sold-off far below its intrinsic value in the short-term. Our activity in
derivatives will provide downside protection, and possibly incremental
return in these cases.
 Given the concentrated nature of JMS, our team can afford to be very
selective in choosing actual portfolio holdings, and should always have ideas
prepared to replace nonperforming holdings.
 Decisions to sell will be emotionless and driven purely by indicators given by
each financial model that we employ. Selling too soon is acceptable; selling
too late is unforgivable.

13. Summary
Increasing the Odds of Successful Stock Market Investing
 Investing is inherently a probabilities game, where the ultimate winner is
the player who chooses the asset with the highest odds of success - over
and over.
 Different stock market practitioners employ different investment
methods, trading on: stock price technical trends; probabilistic mean
reversion dependence; momentum trading; and fundamental analysis - to
name a few.
 Empirical data suggests that each of these strategies can be successful
over time, if applied properly.
 JMS’s belief is that the simultaneous collaboration of ALL of these
investment disciplines will create a revolutionary equity-based investment
product.
 By combining our team’s industry experience with a state-of-the-art
analytical system (developed in-house), we can create a portfolio of some
of the most quality and undervalued equities that consistently possess a
high probability of success.