PD RTFR MU LAS

FORMULAIC TRENDING MONEY MANAGER

The Formulaic Trending Mon thly Abstract

August 15, 2012: RAM Score
=

+13.63

TM Mapper Score

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RAM Score is a proprietary trending tool that takes into account several dynamic components related to the U.S. markets and economy. It features a core baseline which allows for correlation between these multiple components so that they may be added together for an overall Ram Score. As a trending tool, we believe that a positive RAM Score indicates that the odds are stacked in favor of equity investments and a negative RAM Score indicates that odds are stacked TM Mapper Score is a proprietary trending tool that takes into account several dynamic components related to the underlying against equity investments. stocks represented within an index. It identifies certain strengths of individual stocks contained within an index and tracks how many meet minimum Our scoring requirements. As a trending tool, we believe that the higher the percentage of qualifying stocks, the greater the strength of the overall index. mechanisms do not guarantee that the markets will increase when scores are strong or decrease when the scores are weak. But we believe the long term TM correlation may be valuable for investing... Combining our trending features of RAM Score & Mapper Score with our Portformulas intricate Formulaic TM Investing Strategies results in a uniquely logical approach to investing that is exclusively available through Portformulas.

The overall RAM Score has decreased from +20.86 to +13.63 this month... even though the S&P 500 and Dow 30 both posted gains for July. The reason for the contradiction between the markets and RAM Score is primarily due to the fact that theRecessionRisk subcomponent decreased, therefore, indicating a greater likelihood or probability for recession to occur in the near future. Essentially, the economy is muddling along. The GDP remains near 2% with enough job growth to keep the economy moving forward, but not enough to reduce unemployment. Even after some positive July jobs numbers, the 8%+ unemployment rate weighs heavy and leaves the economy susceptible to any other bad news. At the same time, Europe may be simmering down a bit, but another flare-up could easily occur. in August, a highly respected bond expert, by the name of Bill Gross, made an interesting and Jixpected negative prediction regarding equities. As you can imagine, this has initiated a firestorm of feedback in favor of stocks and equities. Most notably from Jeremy Siegel, a highly respected economist who is in support of equities, has been quick to remind everyone that 10 years ago (at the bottom of the bear market) Bill Gross also predicted the Dow would hit 5,000 when it was then at 7,500 (the Dow never went below 7,000) and since then the Dow rallied to a high of 14,000+ before the crisis and current stands at 13,000+ today. One must remember that it is the fireworks-of-predictions that will win headlines (and sell books, secure interviews, etc.) but seldom more.

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I mentioned previously, the trend, or flight, away from managed mutual funds continues. As reported in Investment News in early August... According to Morningstar, investors poured $7.5 billion into U.S. large cap equity ETFs during July. While at the same time, according to the Investment Company Institute, for a one month period ending July 25, equity mutual funds experienced withdrawals of more than $6.6 billion. This seems to validate the ongoing assumption that investor monies are leaving managed investments in favor of unmanaged investments. Or in other words, it seems that people are choosing indexed ETFs (unmanaged) over the money managers running mutual funds (managed). 7

Again, I believe this is much of the reason that our Freedom Series has been growing so rapidly. Essentially, the theory behind the Freedom Series is that rather than selecting an index ETF (or fund) in an attempt to mimic the index, why not use criteria to select only the stocks that qualify from a particular index... An attempt to pick the higher quality stocks from within that index. We think using such criteria makes great sense. So much so that many folks have asked for me to reprint and update the table I published last month that breaks down the Freedom Series since inception. To accommodate that request I have included the table on the next pa TM Also, you may want to take special note of the Mapper Score page that follows as it now includes helpful graphics much like the Ram Score. In summary, RAM Score reflects 6 of 7 subcomponents as positive while Mapper Scores have 4 of 6 increasing. Please check out the following graphic pages for details. For more information you can visit www.portformulas.net or speak with your Financial Advisor (be sure to ask if the new Freedom Series is right for you and your investment goals). Best of Investing, Mike Walters, CEO

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Portformulas Investing Corporation TM Form ulaic Trending Money Manager SEC Registered Investment Advisor 6020 E Fulton St. I Ada, MI 49301 (888) 869-5994 wwiv.portformu1as.net

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PORTFRIVI U LAS

FORMULAIC TRENDING MONEY MANAGER

Below you can see how the time weighted returns (TWR) of the FREEDOM SERIES models compare against their corresponding index since inception earlier this year:
(reedom 5P400.) 0.26% 0.79% -4.26% 0.80% -0.53% -3.00% +0.78%

s&p 400
1.73% -0.30% -6.63% 1.73% -0.12% -3.78%

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March 2012 April 2012 May 2012 June 2012 July 2012 Since Inception Model Difference

2. o -0.11% -5.57% 6.79% -0.28% 3.00% +2.56%

2.01% 0.01% -6.21% 3.99% 0.94% 0.44%

\. NASDAQ 4.20% -1.46% -7.19% 3.81% 0.15% -0.92%

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March 2012 April 2012 May 2012 June 2012 July 2012 Since Inception Model Difference

(______

March 2012 April 2012 May 2012 June 2012 July 2012 Since Inception _ModeI Difference

3.03% 1.28% -2.45% 3.07% 1.56% 6.55% +7.48%

March 2012 April 2012 May 2012 June 2012 July 2012 Since Inception Model Difference

. o 1.52% -3.82% 3.16% 0.67% 4.71% +3.71%

S&P 500 3.13% -0.75% -6.27% 3.96% 1.26% 0.99%

March2012 April 2012 May2012 June 2012 July 2012 Since Inception (_ Model Difference

0.54% 1.60% -3.82% 1.76% -1.05% -1.07% +1.89%

Russell 2000 2.39% -1.62% -6.74% 4.81% -1.45% -2.97%

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March 2012 April 2012 May2012 June 2012 July 2012 Since Inception Model Difference

. 1.23% -3.17% 4.90% -1.33% 3.47% +3.43%

Russell 3000 2.93% -0.77% -6.41% 3.75% 0.87% 0.04%

**The above returns are time-weighted returns; time-weighted returns show the compound growth rate in a portfoio while eliminating the varying effect created by cash inflows and outflows by assuming a single investment at the beginning of the period and measuring market value growth or loss at the end of that period. Time-weighted returns also reflect performance after advisonj fees have been deducted. The Freedom series invests in equities and based on the quailfication criteria, may hold equity positions regardless of overall market movement. Past performance is no guarantee offuture results. Investing in equities carries an inherent risk and it is possible that you could experience significant losses in the event ofa market decline. Please consideryour risk tolerance carefully before investing.

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PD RTFR MU LAS
FORMULAC TRENDING MONEY MANAGER

RAM Score is a proprietary trending tool that takes into account several dynamic components related to the U.S. markets and economy. It features a core baseline which allows for correlation between these multiple components so that they may be added together for an overall Ram Score. As a trending tool, we believe that a positive RAM Score indicates that the odds are stacked in favor of equity investments and a negative RAM Score indicates that odds are stacked against equity investments.
RAM Score (13 mo)

RAM Score (Lifetime)

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Moving Average (13 mo)

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www.portformulas.net

Page 3 of 5

PD RTFR M U LAS.

FORMULAIC TRENDING MONEY MANAGER

TM Mapper Score is a proprietary trending tool that takes into account several dynamic components related to the underlying stocks represented within an index. It identifies certain strengths of individual stocks contained within an index and tracks how many meet minimum requirements. As a trending tool, we believe that the higher the percentage of qualifying stocks, the greater the strength of the overall index. (NOTE: As such, we do not believe that all stocks within an index are automatically worthy of ownership. In the FREEDOM SERIES, we seek to TM only own the stocks that meet our qualification criteria. The Mapper Score illustrates how many stocks we view worthy of consideration.)

TM Mapper Score for Dow 30 Stocks Mappe Mapper Score = 36.67%

Mapper Score for S&P 500 TM

Mapper Score for R TM

sell 3000

Stocks Mappec Mapper Score = 15.20%

75 Stocks Mapped Mapper Score = 5.83%

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Mapper Score for NASDAQ TM

Mapper Score for S&P 400 TM

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Stocks Mappec) Mapper Score = 2.22%

Stocks Mapped Mapper Score = 9.50%

Stocks Mapped 44 Mapper Score = 2.20%

Our scoring mechanisms do not guarantee that the markets will increase when scores are strong or decrease when the scores are weak. TM But we believe the long term correlation may be valuable for investing... Combining our trending features of RAM Score & Mapper Score with our Portformulas intricate Formulaic Investing Strategies results in a uniquely logical approach to investing that is exclusively available TM through Portformulas.
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www.portformulas.net

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PORTFR MULAS

FORMULAIC ThENDING MONEY MANAGER

Please note that there are a number of important disclosures that must be considered before investing in Portformulas. Please read the information and disclosures contained in Portformulas hypothetical carefully before investing. Any performance figures referenced herein are hypothetical and are not indicative of future results. Purchases and sales of securities within Portformulas various strategies may be made without regard to how long you have been invested which could result in tax implications. RAM Score and Mapper Score General Disclosures The RAM Score and Mapper Score illustrations do not represent any particular Portformula strategy nor are they intended to recommend any Portformula strategy or the RAM Score feature. The information contained herein simply attempts to illustrate how our firms RAM Score feature and Mapper Score operate. The RAM Score feature can be applied to many Portformula models at no additional cost. The Mapper Score is simply an analytical informational tool. RAM Score was not developed until January 2010. Prior to January 2010, clients were utilizing RAM Scores predecessor, RAM. Clients utilizing RAM may have had different results than those reflected above. RAM Score movement prior to 2010 is hypothetical and based on retroactive application of RAM Scores indicators to market and economic conditions existing at the time. Portformulas was not managing assets prior to 2007. It is important to understand that RAM Score is only a tool designed to assist our firms management of your account. RAM Score does not guarantee any specific results or performance and even with RAM Score on your account, it is possible that your account will lose value. RAM Score moves assets into or out of the market based on various economic and market indicators. It is possible that the market will move positively while you are not invested or negatively while you are invested, resulting in losses. Any Portformula strategy may underperform or produce negative results. Just because Poriformulas maps a stock does not mean that the stock will be held in a model. Client accounts may hold less stocks than those referenced in the Mapper Score illustration. Mapper Score has no impact on performance. The RAM Score illustration utilizes the S&P 500 index because it is a well-known index and provides a recognizable frame of reference. The Mapper Score analysis uses the referenced indices because they are relevant comparisons across certain Portformula models. The indices referenced herein are not publicly available investment vehicles and cannot be purchased. Furthermore, none of the indices referenced herein have endorsed Portformulas in any way.

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Portformulas Investing Corporation TM Formulaic Trending Money Manager SEC Registered Investment Advisor 6020 E Fulton St. I Ada, MI 49301 (888) 869-5994
www.portformulas.net

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