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HomeMy WebLinkAbout2008-01-29-9:00AM-REGULARBRAZOSCOUNTY BRYAN, TEXAS 6-6a 4 NOTICE OF MEETING AND AGENDA BRAZOS COUNTY COMMISSIONERS COURT THE COMMISSIONERS COURT OF BRAZOS COUNTY WILL MEET IN REGULAR SESSION ON 29 JANUARY 2008 AT 9:00 A.M. IN THE COMMISSIONERS COURTROOM OF THE BRAZOS COUNTY COURTHOUSE, 300 E. 26TH STREET, SUITE 115, BRYAN, TEXAS. 1. Invocation and Pledge of Allegiance - Commissioner Peters. 2. Call for citizen's input and/or concerns. Consider and take action on agenda items 3 -15: 3. Budget Amendment 07/08-15.1 thru 15.5. 4. Personnel Change of Status. 5. Payment of Claims. 6. Request from the County Clerk to make the following appointments to the Brazos County Bilingual Advisory Committee: a. Mr. Gilbert Sifuentez, III replacing Mr. Lupe Ostiguin, Sr. b. Ms. Linda Coates replacing Mr. James Noble Pedida por la Secretaria del Condado para hacer los siguientes nombramientos al Comite Advisorio Bilingue del Condado Brazos: a. Sr. Gilbert Sifuentez, III para reemplazar Sr. Lupe Ostiguin, Sr. b. Sra. Linda Coates para. reemplazar Sr. James Nobles Office of the County Judge • 300 East 26" St. • Suite 114 • ;/Bryan, Texas 77803 • Fax: (979) 361-4503 Commissioners Court Agenda 29 January 2008 Page 2 7. Revision of section 2.02.8.5(e) of the Brazos County Sick Leave Pool Policy to comply with State Statute Section 157.075, allowing eligible employees to request up to 180 days (1,440 hours) or one-third of the Pool, whichever is less. 8. Permission to accept donated property from Wal-Mart for the Brazos County Sheriffs Office. 9. The following deferred compensation plan documents: a. Brazos County Mapping Authorization b. Investment Policy Statement c. Registered Investment Advisor Disclosure Statement. 10. Tax Refund Applications for the following: a. Basileia Builders, LLC b. City of College Station c. Dhirubhai B. Patel d. John W. Walker 11. Payment authorization in the amount of $2,671.20 to Bell Tex Construction for the removal of black algae from the north size of the County Administration Building. 12. Renewal of Bid #2007-007, Seal Coat Projects, with an increase, as Bid #2008-020. 13. Amendment to the Lease Agreement for a Canon IR4570 copier in the County Detention Center, to include the addition of a fax board; the additional cost of this upgrade will be $17.00/month 14. Request for the proposed installation from Wellborn Special Utility District to place 300 ft. of 2" PVC pipe with two bores and within the right-of-way of South Dowling and North Graham Road as per specified requirements. Site is located in Precinct 1. 15. Payment authorization in the amount of $4,000.00 for use of the Expo Complex during the Southern Classic Youth Livestock Educational Experience. A purchase order was not obtained in advance. 16. Announcement of interest items and possible future agenda topics. 17. Call for citizen input and/or concerns. 18. Agency / Board / Committee reports by Court members. 19. Adjourn The Brazos County Courthouse is wheelchair accessible. Handicap parking spaces are available. Any request for sign interpretive services must be made two business days before the meeting. To make arrangements, call (979) 361-4102. 105 a~ 75 COMMISSIONERS' COURT REGULAR MEETING JANUARY 29, 2008 A regular meeting of the Commissioners' Court of Brazos County, Texas was held in the Brazos County Commissioners Courtroom in the Courthouse in Bryan, Brazos County, Texas, beginning at 9:00 a.m. on Tuesday, January 29, 2008 with the following members of the Court present: Randy Sims, County Judge, Presiding; Lloyd Wassermann, Commissioner of Precinct 1; Duane Peters, Commissioner of Precinct 2; Kenny Mallard, Commissioner of Precinct 3; Carey Cauley, Jr., Commissioner of Precinct 4; Karen McQueen, County Clerk. The attached sheet contains the names of the citizens and officials that were in attendance. Commissioner Peters gave the invocation and then led the pledge of allegiance. There was no citizen input/and or concerns. The Court next considered Budget Amendment #07/08-15.1 through 15.5 that would record a donation of funds to the Sheriff's Office; transfer funds from the Grant Fund to Emergency Management; reallocate funds for the District Clerk's Office and Capital Projects-Commissioners Court; and transfer funds from Road & Bridge Contingency to the Road & Bridge Department. On motion by Commissioner Cauley, seconded Vol 105 Page 11(0 Commissioners Court meeting January 29, 2008 2 by Commissioner Peters, the Court voted unanimously to approve the budget amendments with the exception of number 15.5 the transfer of funds from Road & Bridge Contingency to the Road & Bridge Department. A copy each amendment that was approved is attached. The Court proceeded to consider the change of status of employees as submitted on the attached Personnel Action Requests. On motion by Commissioner Cauley, seconded by Commissioner Peters, the Court voted unanimously to approve the changes as submitted. The Court next considered the following Claims as submitted by the County Treasurer for payment: 7045916 through 7046119 On motion by Commissioner Mallard, seconded by Commissioner Cauley, the Court voted unanimously to approve the Claims as submitted. The next matter before the Court was consideration of a request from the County Clerk's office to make the following appointments to the Brazos County Bilingual Advisory Committee: a. Mr. Gilbert Sifuentez, III, replacing Mr. Lupe Ostiguin, Sr. b. Ms. Linda Coates, replacing Mr. James Nobles. Vol 10-S Page i l-7 Commissioners Court meeting January 29, 2008 3 On motion by Commissioner Wassermann, seconded by Commissioner Cauley the Court voted unanimously to approve the request from the County Clerk. The next matter before the Court was consideration of revision of Section 2.02.8.5(e) in the Sick Leave Pool policy to comply with State Statute Section 157.075. This will allow an eligible employee up to 180 days (1,440) hours or one-third of the Pool, whichever is less. Previously the maximum amount an employee could request was 90 days (720) hours) or one- third of the Pool, whichever is less. On motion by Commissioner Peters, seconded by Commissioner Wassermann, the Court voted unanimously to approve the revision of Section 2.02.8.5(e) in the Sick Leave Pool policy to comply with State Statute Section 157.075. A copy is attached. The Court next considered authorizing acceptance of donated property from Walmart. The office of the Sheriff has been offered a Bounty Hunter Pioneer Metal Detector with an estimated value of $79.98. On motion by Commissioner Cauley, seconded by Commissioner Peters, the Court voted unanimously to accept the donated property. The next matter before the Court was consideration of the following deferred compensation plan documents: a. Brazos County Mapping Authorization b. Investment Policy Statement Vol t o5 Page 11? Commissioners Court meeting January 29, 2008 4 c. Registered Investment Advisor Disclosure Statement On motion by Commissioner Wassermann, seconded by Commissioner Cauley, the Court voted unanimously to approve the deferred compensation plan documents. A copy of each is attached. The next matter for consideration was approval of tax refund applications from the following individuals and/or companies: a. Basileia Builders, LLC, over payment $600.48 b. City of College Station, over payment $40.56 c. Dhirubhai B. Patel, over payment $2,422.76 d. John W. Walker, over payment $10.00 On motion by Commissioner Cauley, seconded by Commissioner Peters, the Court voted unanimously to approve the tax refund applications. The Court next considered a payment authorization in the amount of $2,671.20 to Bell Tex Construction for the removal of black algae from the north side of the County Administration Building. On motion by Commissioner Peters, seconded by Commissioner Cauley, the Court voted unanimously to approve the payment authorization. The Court next considered the renewal of Bid #2007-007, Seal Coat Projects, with an increase, as Bid #2008-020. F. N. Ploch Construction Company has agreed to the renewal. The increases of 6.1 percent for .40 gallons per square yard for a new rate of $1.156 and 7.15 percent for .42 gallons per square Vol 105 Page 179 Commissioners Court meeting January 29, 2008 5 yard for a new rate of $1.175 are effective with court acceptance. On motion by Commissioner Wassermann, seconded by Commissioner Cauley, the Court voted unanimously to approve the renewal with increases. The next matter before the Court was consideration of an amendment to the copier lease agreement with IKON. This lease agreement is for a Canon IR4570 copier leased for the Brazos County Detention Center and it will include the addition of a Fax board. The additional cost for this upgrade will be $17.00 per month. On motion by Commissioner Peters, seconded by Commissioner Mallard, the Court voted unanimously to approve the amendment to the copier lease agreement with IKON. A copy is attached. The Court next considered the request from Wellborn Special Utility District to place 300 feet of 2 inch PVC pipe with two bores and within the right-of-way of South Dowling and North Graham Road. The sites are located in Precinct 1. The County Engineer stated that all appeared to be in order and recommended approval. On motion by Commissioner Wassermann, seconded by Commissioner Cauley, the Court voted unanimously to approve the request from Wellborn Special Utility District and authorized the installation. A copy of the request is attached hereto. Vol i 0-G Page 1 GO Commissioners Court meeting January 29, 2008 6 The next matter before the Court was consideration of payment authorization in the amount of $4,000.00 payable to the Exposition Center. The Extension Service did not obtain a purchase order in advance. On motion by the County Judge, seconded by Commissioner Peters, the Court voted unanimously to approve the payment authorization. There were no announcements of interest items and possible future agenda topics. Under citizen input and/or concerns, the following spoke: Sheriff Chris Kirk a. The jail population last night inmates. There are 106 indivi( electronic monitoring. He will go Commission to ask for variances and anticipate any problems. Under Agency/Board/Committee reports the following spoke: Commissioner Wassermann was 516 duals on the Jail does not by Court members, a) He has had nine (9) meetings on animal ordinances. There is still a lot of work ahead. Commissioner Mallard a) The remodeling on the EOC should be through by the end of the month, but will probably not occupy it yet because they are waiting on the elevator. Vol J OS Page 19 Commissioners Court meeting January 29, 2008 County Judge a) Asked Richard Vance, County Engineer if he checked old Jones Road. Anderson Jones asked about it last week. Mr. Vance said it is an ongoing problem with Mr. Palasota. He will not cooperate. He has torn up county property repeatedly. The County Judge asked the Sheriff for help. Commissioner Cauley asked about a "Truck Wash". 7 There being no further business to come before the Court, the meeting was adjourned. Vol a5 Page I to The foregoing minutes of the Commissioners Court meeting held January 29, 2008 have been examined and are approved in open Court this the z)~ day of 2008, in Bryan, Brazos County, Texas. Duane Peters Commissioner, Precinct 2 1115 Carey Cauley, Jr. Commissioner, Precinct 4 Attest: aren McQueen County Clerk Ilel Lloyd assermann Commissioner, Precinct 1 Kenny Malla Commissione Precinct 3 Vol I o~ Page 1 83 BRAZOS COUNTY COMMISSIONERS COURT DAY OF , 20p8 AT Name Organization G Jam, C/~ (~~~/r opt/ -~L ham' B RAZO S COUNTY COMMISSIONERS COURT ate.. DAY OF , 2WV AT q.'c o AM/ft# Name Organization J C's o 1-31,16 V, io4olecf- 6"ji Ids ►~5 H BRAZOS COUNTY, TEXAS BUDGET AMENDMENT(S) FOR THE 2007-2008 BUDGET YEAR u- NO.07/08-15.1 thru 07/08-1&.5" On this the 29`h day of January 2008 at a regular meeting of the Commissioners' Court, the following members were present: Randy Sims, County Judge, Presiding Lloyd Wassermann, Commissioner, Precinct 1 E. Duane Peters, Commissioner, Precinct 2 G. Kenny Mallard, Commissioner, Precinct 3 Carey Cauley, Jr., Commissioner, Precinct 4 Karen McQueen, County Clerk The following proceedings were held: THAT WHEREAS, on 29 January 2008 the Court heard and approved a budget amendment for the 2007-2008 budget year for Brazos County, Texas; and WHEREAS, an expenditure is necessary due to the necessity to meet unusual and unforeseen conditions which could not be reasonably included in the original budget adopted 11 September 2007, the following amendment(s) to the original budget are hereby authorized, as described on the attached page(s). ADOPTED AND APPROVED this the 29`h day of January 2008. THE COMMISSIONERS COURT OF BRAZOS COUNTY, TEXAS. By Original: County Clerk's Office and attached to the original budget Copies: County Auditor County Treasurer County Budget Officer Commissioners' Court Minutes 105 19(0 BRAZOS COUNTY, TEXAS BUDGET AMENDMENTS No. 07108 -16.1 1/29/2008 FUND DIV ACCT PROD DR/CR ACCOUNT NAME Increase Decrease 0100 1 460230001 1 CR Donations - Other 500.00 0100 1 280001001 673420001 1 DR Furniture 500.00 Sheriff Office Administration To record the donation of funds for use b the Sheriff Office for general purposes, which will be used to nurchase needed furniture. Prepared By; lfj Date: 1124/2008 4/ .Z J Department App val b to County Ju a Approval Date 105 1$7 BRAZOS COUNTY, TEXAS BUDGET AMENDMENTS No. 07/08 - 15.2 1/29/2008 FUND DIV ACCT PROJ DR/CR ACCOUNT NAME Increase Decrease 3000 48071000 CR TDPS - DEM 10,900.00 3000 355500 61010000 DR Advertising 10,900.00 Grant Fund: Hazardous Materials Emergency Preparedness Planning Grant To appropriate rant funds from the Texas Department of Public Safe - Division of Emergency Mana ement for public service announcements. Grant was approved b Commissioner's Court on January 22, 2008. This project will be used to educate the general public on expectations of receiving a call from the emer enc notifications stem and either sheltering-in lace or evacuating. Brazos County will produce Public Service Announcements (PSA's) in English and Spanish to convey the messa a across radio and TV media. Prepared By: ifj Date: 1/24/2008 I D-,5 139 BRAZOS COUNTY, TEXAS BUDGET AMENDMENTS No. 07/08 -15.3 1/29/2008 FUND DIV ACCT PROJ DR/CR ACCOUNT NAME Increase Decrease 2300 20005000 72590000 CR Professional Fees - Other 6,723.00 2300 20005000 60500000 DR Office Equipment 6,723.00 District Clerk Management Fund ~To reallocate the budget to provide funds for flat screen monitors. Prepared By: ifj Date: 1/24/2008 County 10 5 199 Department Approval Date BRAZOS COUNTY, TEXAS BUDGET AMENDMENTS No. 07/08 - 16.4 1/29/2008 FUND DIV ACCT PROJ DR/CR ACCOUNT NAME Increase Decrease 4500 63000500 60360000 CR Furniture 3,212 17 4500 63000500 67342000 DR Furniture 3,212.171 1 Capital Projects -Commissioners' Court: To move funds to provide for the purchase of furniture items over $500 in the ro er account. Department Appro/vJal Date Prepared By: it8 Date: 1/24/2008 County Jude Approval Date 105 19D i BRAZOS COUNTY, TEXAS BUDGET AMENDMENTS No. 07/08 -15.5 1/29/2008 FUND DIV ACCT PROJ DR/CR ACCOUNT NAME Increase Decrease 0100 1560010001611300001 1 CR Contin enc 152,000.00 0100 1560010001804400001 1 DR Land 152,000.00 (Road & Bridge ITo move funds to provide for the purchase of real estate, approved by Commissioner's Court on Ja nuarv 8. 2008. Department Approval Date Prepared By: ifj Date: 1124/2008 County Judge Approval Date PERSONNEL CHANGE OF STATUS REQUESTS Commissioner Court Date: January 29, 2008 Department Submitting Information: Human Resources Purpose of Submissions: Consider and Take Action on Change Requests Department Submitting Employee Request Action Reque,, Request(s) Applies To Brazos Center Fickey, LaRita New Hire Justice of the Peace Pct. 3 Lambright, Michelle New Hire Building Maintenance Hall, David Budget Increase SO/Jail Sanders, Richard Stultz, James Jones, Cynthia Transfer within Dept. Budget Increase Retirement Approved in Commissioners' Court: County Judge's or Commissioner's S (This Copy to be attached to minutes, 10.5 § 157.075[01. EMPLOYEE WITHDRAWAL FROM SICK LEAVE POOL. (a) An employee is eligible to use time contributed to the county sick leave pool if: (1) because of a catastrophic injury or illness, the employee has exhausted all the accrued paid leave and compensatory time to which the employee is otherwise entitled; and (2) the employee is enrolled in the county sick leave pool, if the commissioners court requires enrollment under Section 157.073(a). (b) An eligible employee must apply to the administrator for permission to use time in the county sick leave pool. If the administrator determines that the employee is eligible, the administrator shall approve the transfer of time from the pool to the employee. The administrator shall credit the time to the employee, and the employee may use the time in the same manner as sick leave earned by the employee in the course of employment. (c) An eligible employee may not use time in the county sick leave pool in an amount that exceeds the lesser of one-third of the total amount of time in the pool or 180 days. The administrator shall determine the exact amount that an eligible employee may use. (d) An employee absent on sick leave assigned from the county sick leave pool is treated for all purposes as if the employee were absent on earned sick leave. (e) The estate of a deceased employee is not entitled to payment for unused sick leave acquired by that employee from the county sick leave pool. Added by Acts 1993, 73rd Leg., ch. 613, § 1, eff. Aug. 30, 1993. Amended by Acts 1997, 75th Leg., ch. 612, § 3, eff. Sept. 1, 1997; Acts 2001, 77th Leg., ch. 493, § 3, eff. June 11, 2001; Acts 2001, 77th Leg., ch. 554, § 1, eff. June 11, 2001. ~q13 REVISION TO 2.02.8.5(e) 2.02.8.5 DAYS GRANTED: Only members of the Sick Leave Pool will be granted days from the Pool. a. Days will be granted only for catastrophic illness or surgery or other disability, which necessitates the absence from work for five (5) consecutive days or longer. In case of chemotherapy for cancer treatment, days can be granted for 1 - 4 days absence. b. Pregnancy will not be covered by the Sick Leave Pool, but complications due to pregnancy or delivery will be considered. c. The Pool may be used only by members for his/her personal illness or disability or for a family member whose illness and relationship to the employee meet the guidelines of the Family Medical Leave Act and the Brazos County Family and Medical Leave Policy. d. Days requested for stress related illness will be granted for hospitalized days only. The maximum number of days granted to an employee each year shall not exceed one-third of the total amount of time in the Pool at the time of the request or 180 days whichever is less. f. Days will not be granted when an employee is receiving workers' compensation or long-term disability benefits. g. A member of the Pool, who exhausts all of his/her accrued paid leave and compensatory time to which the employee is otherwise entitled, may withdraw from the pool for a non-catastrophic illness the exact number of days the member had contributed that fiscal year. 2.02 Page 7 of 8 APPRO Sims, County Judge date I v~ )qq Brazos County Mapping Authorization Current Variflex Invesment Options MFS® VIT Total Return SBL Managed Asset Allocation (T. Rowe Price Associates, Inc.) Van Kampen UIF Equity and Income SBL Global (OppenheimerFunds, Inc.) PIMCO VIT Real Return Van Kampen LIT Government SBL High Yield SBL Diversified Income PIMCO VIT Foreign Bond (U.S. Dollar-Hedged) AIM V.I. International Growth Dreyfus VIF International Value MFS® VIT Research International SBL Alpha Opportunity (Mainstream Investment Advisers, LLC) SBL Enhanced Index (Northern Trust Investments, N.A.) SBL Equity American Century VP Ultra@ Legg Mason Partners Variable Aggressive Growth SBL Select 25 AIM V.I. Basic Value American Century VP Value SBL Equity Income (T. Rowe Price Associates, Inc.) SBL Large Cap Value Van Kampen LIT Comstock AIM V.I. Mid Cap Core Equity AIM V.I. Capital Development SBL Mid Cap Growth SBL Mid Cap Value SBL Money Market PIMCO VIT Low Duration Fixed Account Oppenheimer Main Street Small Cap Fund®/VA Royce Micro-Cap Legg Mason Partners Variable Small Cap Growth SBL Small Cap Growth (RS Investment Management, LP) SBL Small Cap Value (Wells Capital Management Incorporated) Neuberger Berman AMT Socially Responsive PIMCO VIT All Asset PIMCO VIT CommodityRealReturn Strategy AIM V.I. Global Health Care AIM V.I. Global Real Estate Dreyfus IP Technology Growth MFS® VIT Utilities Rydex VT Sector Rotation Map To SFR 457 Program Investment Options 4 Van Kampen Equity and Income 4 Van Kampen Equity and Income Van Kampen Equity and Income • T. Rowe Price Global Stock • PIMCO Real Return • PIMCO Real Return • Legg Mason Partners Global High Yield Bond • Federated Bond • American Century International Bond • Janus Adviser International Growth • T. Rowe Price International Growth & Income • T. Rowe Price International Growth & Income • Jennison 20/20 Focus • Dreyfus S&P 500 Stock Index • American Century Equity Growth • T. Rowe Price Growth Stock • T. Rowe Price Growth Stock • Janus Adviser Growth and Income • Dreyfus Premier Strategic Value Dreyfus Premier Strategic Value 4 Jennison Value Jennison Value • Van Kampen Comstock • Aston/Optimum Mid Cap • AIM Capital Development • AIM Capital Development Security Mid Cap Value 4 ABN AMRO Income Plus 4 ABN AMRO Income Plus 4 ABN AMRO Income Plus 4 Royce Value 4 Royce Value 4 AIM Small Cap Growth 4 AIM Small Cap Growth 4 RS Partners 4 Neuberger Berman Socially Responsive 4 T. Rowe Price Retirement Income 4 T. Rowe Price Retirement Income 4 T. Rowe Price Retirement Income 4 Fidelity® Advisor Real Estate 4 RS Informationa Age 4 Jennison Natural Resources 4 Van Kampen Equity and Income The above mapping instructions are hereby authorized, and it is understood that the plan assets will be out of the market/un-invested for one day as a result of the mapping. Plan Number I k Date Print Name and Title J j SECURITY BENEFIT'" Investment Policy Statement Brazos County 1/1/2008 Contents 1. Plan Overview, Purpose and Objectives 5. Selection & Monitoring Plan Investment 2. Roles and Responsibilities Options 3. Investment Objectives 6. Plan Investment Options 4. Investment Program / Categories 7. Definitions 8. Legal & Disclosure Section One - Overview, Purpose and Objectives Purpose of Investment Policy Statement Brazos County offers a retirement plan which is a supplemental employee benefit plan intended to comply with all applicable federal laws and regulations and other applicable state and federal laws. This Investment Policy Statement ("the IPS") has been adopted by the Plan Administrator or Committee to provide guidelines for the investment and management of assets held in trust for the benefit of participants in and beneficiaries of the plan and its participants. This IPS shall remain in effect until revised or amended by the authorized person or committee. It is anticipated that the IPS will be reviewed from time to time, and at least annually, to assure its continued accuracy and efficacy. Statement of Plan Purpose The Plan has been established to provide eligible employees with a vehicle to accumulate and manage assets targeted to fund retirement and other financial needs. The IPS is designed to outline the controlling philosophies and processes for the selection, monitoring and evaluation of the investment options used by the Plan. Recognizing that participants have differing investment objectives, they will be afforded the ability to direct their contributions and account balances among a range of investment options in order to construct a diversified portfolio that meets their specific objectives. Participants and their beneficiaries alone bear the risk of investment results from the options and the asset mixes that they select in the Plan. Plan Objectives The primary objectives of the Plan are to: 4 Provide Participants with the opportunity to accumulate assets, on a tax deferred basis, to provide funds for retirement or for other allowable uses. Offer a range and variety of investment options (the "investment program") that meet the needs of the majority of Plan Participants. Deliver plan services, administration and investment options at reasonable cost. Provide Participants with the opportunity to defer taxable income. _(_Q 15 o e • • --onsibilit es Parties responsible for oversight of the Plan may be identified and documented by exhibit to this document or other Plan documentation supporting the establishment and operation of the Plan. These may include: • Plan Administrator • Employer as Plan Sponsor • Investment or Retirement Committee • Plan Trustee(s) • Investment Advisor • Plan Consultant • Custodian • Recordkeeper /Administration Provider • Legal Counsel These duties may include: • As dictated by conditions set forth in the Investment Policy Statement (IPS), oversee the addition and/or removal of specific funds from time-to-time as needed. • Assure compliance of the Plan documents and its operations with applicable rules, regulations and best practices. • Assure timeliness of transactions and deposit of contributions. • Conduct a periodic review of the IPS. • Designate investment categories available to Participants that is sufficient in number and diversification to meet 404(c) regulations. • Develop and assure continued conformance with an IPS. • Establish criteria against which to measure progress toward achieving the Plan objectives and the performance of the selected fund options. • Monitor funds for continued suitability and comparative performance within investment categories and provide explanatory analysis for selected time periods. • Monitor investment program for performance and continued suitability and communicate those results to the appropriate oversight committee or individual. • Provide ongoing oversight related to the operation and administration of the Plan and its investment program. • Prudently and diligently select a number of fund options within each investment category from which participants may choose. The Plan's investment program will be constructed to achieve the following objectives: • Provide the opportunity to maximize returns with a prudent level of risk. Provide returns within investment categories that are comparable and competitive with those of similar investment options. "c> 2005 PIarlu(-%, 1_11C Page 2 of 7 x.05 ~ '.~1 Program Categories ,tection Four - investment Investment Program of the Plan The Plan has made an affirmative decision to use investment products and services offered by Security Distributors Inc. Investments available through the provider may be based upon issues of plan size, service requirements, expense reimbursement and other business management issues. Investment Categories selected for use by the Plan ("the Investment Program") are as follows: Asset Class Asset Class LG Large Growth MA Moderate Allocation LB Large Blend TA Target-Date 2000-2014 LV Lar a Value TB Target-Date 2015-2029 MG Mid-Ca Growth TC Target-Date 2030+ MB Mid-Ca Blend SN S ecialt -Natural Resources MV Mid-Ca Value SR Specialty-Real Estate SG Small Growth ST Specialty-Technology SB Small Blend IB World Bond SV Small Value HY High Yield Bond FG Foreign Large Growth Cl Intermediate-Term Bond FB Foreign Large Blend IP Inflation-Protected Bond FV Foreign Lar a Value CS Short-Term Bond EM Diversified Emerging Markets TM Money Market Taxable WS World Stock Section Five - Selection & Monitoring of Investment Options Selection Standards and Criteria The authorized parties will consider appropriate elements of management for investments available under the Plan. Investment options will be chosen on the basis of compatibility with Plan objectives and Participant diversification needs. Fiduciary considerations and standards used to support decision-making regarding selection and monitoring of Plan's investment options may be both quantitative as well as qualitative in nature. These include, but are not limited to, the following: 4 Comparative performance within fund category. Risk assessment, adjustment and measurement. Competitive fees associated with investment management, fund operations and administration. Fund portfolio management style and manager tenure. • Business reputation and a position in good standing with regulators. • Lack of material pending legal issues or concluded legal actions. Oversight policies of fund investment advisors and fund boards (directors or trustees). SFR iPS i)n(_:Ume-J .c) 200") Pianloois, b L Page 3 of 7 dos tl L~~ Additional considerations may include such factors as general economic and financial market conditions and trends; overall diversification of the investment options; and the adherence of each option to its stated investment objectives. Monitoring of Investment Options The Investment Program will be reviewed on at least an annual basis including an evaluation of each investment option in terms of the select performance and other investment standards. Specifically, the investment options of the plan will be measured against an appropriate peer group by style, based upon: A. Total return over 3 year period: Median or greater for its peer group B. Total return over 5 year period: Median or greater for its peer group C. Risk adjusted return over 3 year period: No less than 75% for its peer group D. Fund operating expense ratio: No more than 75% of its peer group The Investment Program will be monitored to ensure that the investment options continue to meet the investment standards reflected in this document. If an investment has failed to pass the above criteria for six consecutive quarters, it will be replaced with a like fund in the same investment category, replacements will occur annually. Certain circumstances or market conditions may not permit a fund to be replaced with another fund in the same investment category. It is anticipated that if an investment committee is formed, it will meet from time to time, and at least annually, to fulfill the specified responsibilities outlined in the IPS. Such meetings may be held in person or may be conducted via telephone. • • • • The Plan has selected the investment options available in the Security Benefit Retirement Product as available investments in the Plan. Signature Date Print Name Title ,1 1) -i IP5 Documt,rd 2005 Planlo(-%, Li C Fa.-io a of 05 j qq Section Seven -Definitions Benchmark / Peer Group The index or peer group median with which subject investment option may be compared. Corporate Trustee Legal entity that assumes role of Trustee for a fee. _ Custodian Bank, brokerage or trust organization which holds the assets _ of the Plan. ERISA The Employee Retirement Income Security Act of 1974 (ERISA), as amended subsequent to passage. The primary source of legal and regulatory guidance on matters of Plan operations. ERISA does not apply to governmental plans. Investment Categories Defined subsets of investment universe segmented by general asset classes and specialized management styles. May be seen as equivalent to mutual fund categories as reported by certain agencies (such as Standard & Poor's, Lipper or Morningstar), or defined by some third party or advisory service. _ Investment Program Investments offered through Security Benefit's Retirement Program. Investment Policy A written policy which provides for a general outline of the Statement subject Plan's use and offer of investments for use by the Plan and its Participants. Investment Options Those specific investment vehicles that may be offered to Plan Participants. May include registered mutual funds, common trust funds, and self-directed accounts. _ Investment universe A specific group of investment options available through a given service provider, on behalf of a specific Plan client or group of Plan clients. A single vendor may offer multiple sets of funds to clients, based upon issues of plan size, service requirements, expense reimbursement and/or other business management issues. rPlan Administrator An individual or entity as defined under ERISA, not necessarily the plan administration service provider or recordkeeper. Plan Consultant An individual or entity retained to assist in the design of the Plan and its non-investment policies and procedures; as well as to (optionally) participate in the administration, compliance testing and Plan and compliance reporting and operation of the Plan. SFF' !PS Document (c) 2005 Plan Tools, I__C Page 5 of 7 u.._.'21®0 Plan Recordkeeper An organization retained to account for and manage operations related to Plan assets, Plan qualification, periodic Plan and Participant reporting and (optionally) the administration, compliance testing and Plan and compliance reporting and operation of the Plan. _ Plan Sponsor Employer, Employer group or other entity which makes the Plan available to eligible Employees. Selected Investment Plan Investment Option made available through the Plan, Option upon implementation of the Investment Policy Statement. Section 404(c) Section 404(c) of ERISA permits retirement plans to transfer the responsibility (and the liability) for selecting among the investment options in a 401(k) plan (or other participant- directed defined contribution plan) to participants if 1) the participant actually directs the investment of his or her account, and 2) the plan satisfies the requirements of the 404(c) regulations. Not applicable for governmental plans but may represent best practices for Non-ERISA Plans. Selection / Monitoring Variable measurement of Selection/Monitoring Standard. Criteria Example: An investment option which has a 5 Year Investment Return Greater Than the median of its Peer Group. Selection / Monitoring Selection/Monitoring Standard for which a minimal Standard performance Criteria is set. Example: An investment option which has a 5 Year Investment Return Greater Than the median of its Peer Group. ~l The Committee A group of individuals that has been formed to direct the investment decisions and operations of the Plan. The Plan A legally created, artificial person (Trust) with the sole purpose of providing for the investment of funds for Participant retirement. "'W IF'S I-)ncument ~c; ?U05 PIGnTnol~, LI_C !'a ,fie b of 7 Section Eight - Legal & Disclosure Security Benefit, PlanToolsTm and PlanTools, LLC This document has been produced through the use of a Web-enabled technology platform. The PlanToolSTm Fiduciary Risk Management System has been designed to help plan sponsors, financial institutions and their professional advisors to provide for the fulfillment of investment related requirements of retirement law. In providing access to this customized, plan-specific investment policy statement, PlanTools, LLC shall not be deemed an agent or co-fiduciary to, of, or for the Plan. PlanTools, LLC and its affiliates have taken every effort to ensure that the systemic elements that produced this document accurately reflect the needs, constraints and objectives of the Plan and its Participants. Given that these tools are used by others in the production and use of this document, McHenry will accept no responsibility for any liability in its use. Please consult legal, investment or consulting counsel. You should consider the investment objectives, risks, and charges and expenses of the mutual funds carefully before investing. You may obtain a prospectus that contains this and other information about the funds by calling our National Service Center at 1-800-888- 2461. You should read the prospectus carefully before investing. Investing in the funds involves risk and there is no guarantee of investment results. Past performance is no guarantee of future results. Investing in mutual funds involves risk. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. For fund specific performance and risks, refer to the SFR Program performance sheet for the most recent quarter end, attached hereto. The SFR Program is distributed by Security Distributors, Inc. SFP iPS Document > 2005 PkmTools, 1-1-C P.Jre 7 of 7 1 05 ~V~- fi r 17 a 0 ..r 00 0 A N U z 4~ ~ oo N V!= A W a° a a d ul- aj ~I ~I V!= I~ O u ~ A rz, 0 0 N M O d N O l ~5 V,,) FORM ADV Part II - Page 1 Uniform Application for Investment Adviser Registration OMB APPROVAL OMB Number: 3235-0049 Expires: July 31, 2008 Estimated average burden hours per response 9.402 Name of Investment Adviser: CLS Investment Firm, LLC Address: (Number and Street) (City) (State) (Zip Code) Area Code Telephone Number 4020 South 147th Street Omaha NE 68137 402 493.3313 This part of Form ADV gives information about the investment adviser and its business for the use of clients. The information has not been approved or verified by any governmental authority. Table of Contents Item Item Page Number 1 Advisory Services and Fees 2 2 Types of Clients 2 3 Types of Investments 3 4 Methods of Analysis, Sources of Information and Investment Strategies...... 3 5 Education and Business Standards 4 6 Education and Business Background 4 7 Other Business Activities 4 8 Other Financial Industry Activities or Affiliations 4 9 Participation or Interest in Client Transactions 5 10 Conditions for Managing Accounts 5 11 Review of Accounts 5 12 Investment or Brokerage Discretion 6 13 Additional Compensation 6 14 Balance Sheet 6 Continuation Sheet Schedule F Balance Sheet, if required Schedule G (Schedules A, B, C, D, and E are included with Part I of this Form, for the use of regulatory bodies, and are not distributed to clients.) l Potential Persons who are not to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. )6 o~ Form ADV Applicant: Part 11 - Page 2 CLS Investment Firm, LLC SEC File Number: Date: 801- 57265 03/31/2007 1. A. Advisory Services and Fees. (check the applicable boxes) For each type of service provided, state the approximate % of total advisory billings from that service. (See instruction below.) Applicant: (1) Provides investment supervisory services 99 % (2) Manages investment advisory accounts not involving investment supervisory services % f (3) Furnishes investment advice through consultations not included in either service described above 1 % (4) Issues periodicals about securities by subscription % (5) Issues special reports about securities not included in any service described above % - (6) Issues, not as part of any service described above, any charts, graphs, formulas, or other devices which client may use to evaluate securities % - (7) On more than an occasional basis, furnishes advice to clients on matters not involving securities % (8) Provides a timing service % (9) Furnishes advice about securities in any manner not described above ova (Percentages should be based on applicant's last fiscal year. If applicant has not completed its first fiscal year, provide estimates of advisory billings for that year and state that the percentages are estimates.) Yes No B. Does applicant call any of the services it checked above financial planning or some similar term? F W C. Applicant offers investment advisory services for: (check all that apply) rw-0 (1) A percentage of assets under management (4) Subscription fees r (2) Hourly charges r (5) Commissions r (3) Fixed fees (not including subscription fees) r (6) Other D. For each checked box in A above, describe on Schedule F: • the services provided, including the name of any publication or report issued by the adviser on a subscription basis or for a fee • applicant's basic fee schedule, how fees are charged and whether its fees are negotiable • when compensation is payable, and if compensation is payable before service is provided, how a client may get a refund or may terminate an investment advisory contract before its expiration date 2. Types of Clients Applicant generally provides investment advice to: (check those that apply) P A. Individuals F E. Trusts, estates, or charitable organizations 50- B. Banks or thrift institutions W F. Corporations or business entities other than those listed above jV C. Investment companies Fv- G. Other (describe on Schedule F) r D. Pension and profit sharing plans Answer all items. Complete amended pages in full, circle amended items and file with execution page (page 1). 105 905 Form ADV Part 11 - Page 3 licant: CLS Investment Firm, LLC SEC File Number: Date: 801- 57265 03/31/2007 3. Types of Investments Applicant offers advice on the following: (check those that apply) A. Equity securities F,/- H. United States governmental securities Fv- (1) exchange-listed securities FV- (2) securities traded over-the-counter I. Options contracts on: Fv- (3) foreign issuers r (1) securities (2) commodities r B. Warrants rv- C. Corporate debt securities J. Futures contracts on: (other than commercial paper) r- (1) tangibles Fv D. Commercial paper r (2) intangibles I E. Certificates of deposit F,O- F. Municipal securities K. Interests in partnerships investing in: (1) real estate G. Investment company securities: F (2) oil and gas interests Fv- (1) variable life insurance (3) other (explain on Schedule F) r (2) variable annuities f -v (3) mutual fund shares Fv- L. Other (explain on Schedule F) 4. Methods of Analysis, Sources of Information, and Investment Strategies. A. Applicant's security analysis methods include: (check those that apply) (1) fv-o Charting (4) F Cyclical (2) f Fundamental (5) Fv- Other (explain on Schedule F) (3) Fv- Technical B. The main sources of information applicant uses include: (check those that apply) (1) r Financial newspapers and magazines (5) F Timing services (2) r-- Inspections of corporate activities (6) rv- Annual reports, prospectuses, filings with the Securities and Exchange Commission (3) r,-0 Research materials prepared by others (7) fv Company press releases (4) r-- Corporate rating services (8) rv- Other (explain on Schedule F) C. The investment strategies used to implement any investment advice given to clients include: (check those that apply) (1) rv- Long term purchases (securities held at least a year) (5) r Margin transactions (2) r Short term purchases (securities sold within a year) (6) rv- Option writing, including covered options, uncovered options, or spreading strategies (3) Trading (securities sold within 30 days) (7) r Other (explain on Schedule F) (4) r Short sales Answer all items. Complete amended pages in full, circle amended items and file with execution page (page 1). 105 Form ADV Applicant: Part 11 - Page 4 CLS Investment Firm, LLC SEC File Number: Date: 801- 57265 03/31/2007 5. Education and Business Standards. Yes No Are there any general standards of education or business experience that applicant requires of those involved in determining or giving investment advice to clients? F F (If yes, describe these standards on Schedule F.) 6. Education and Business Background. For: • each member of the investment committee or group that determines general investment advice to be given to clients, or • if the applicant has no investment committee or group, each individual who determines general investment advice given to clients (if more than five, respond only for their supervisors) • each principal executive officer of applicant or each person with similar status or performing similar functions. On Schedule F, give the: • name formal education after high school • year of birth business background for the preceding five years 7. Other Business Activities. (check those that apply) A. Applicant is actively engaged in a business other than giving investment advice. B. Applicant sells products or services other than investment advice to clients. r C. The principal business of applicant or its principal executive officers involves something other than providing investment advice. (For each checked box describe the other activities, including the time spent on them, on Schedule F.) 8. Other Financial Industry Activities or Affiliations. (check those that apply) A. Applicant is registered (or has an application pending) as a securities broker-dealer. B. Applicant is registered (or has an application pending) as a futures commission merchant, commodity pool operator or commodity trading adviser. C. Applicant has arrangements that are material to its advisory business or its clients with a related person who is a: F (1) broker-dealer (7) accounting firm (v (2) investment company r- (g) law firm r (3) other investment adviser r (9) insurance company or agency r- (4) financial planning firm r-- (10) pension consultant r (5) commodity pool operator, commodity trading r (11) real estate broker or dealer adviser or futures commission merchant F%O- (6) banking or thrift institution r (12) entity that creates or packages limited partnerships (For each checked box in C, on Schedule F identify the related person and describe the relationship and the arrangements.) Yes No D. Is applicant or a related person a general partner in any partnership in which clients are solicited to invest?... F F (If yes, describe on Schedule F the partnerships and what they invest in.) Answer all items. Complete amended pages in full, circle amended items and file with execution page (page 1). b~ a07 Form ADV Applicant: Part II - Page 5 CLS Investment Firm, LLC SEC File Number: Date: 8 01- 57265 03/31/2007 9. Participation of Interest in Client Transactions. Applicant or a related person: (check those that apply) F- A. As principal, buys securities for itself from or sells securities it owns to any client. B. As broker or agent effects securities transactions for compensation for any client. C. As broker or agent for any person other than a client effects transactions in which client securities are sold to or bought from a brokerage customer. D. Recommends to clients that they buy or sell securities or investment products in which the applicant or a related person has some financial interest. r E. Buys or sells for itself securities that it also recommends to clients. (For each box checked, describe on Schedule F when the applicant or a related person engages in these transactions and what restrictions, internal procedures, or disclosures are used for conflicts of interest in those transactions.) Describe, on Schedule F, your code of ethics, and state that you will provide a copy of your code of ethics to any client or prospective client upon request. 10. Conditions for Managing Accounts. Does the applicant provide investment supervisory services, manage yes No investment advisory accounts or hold itself out as providing financial planning or some similarly termed services and impose a minimum dollar value of assets or other conditions for starting or maintaining an _ account? (If yes, describe on Schedule F.) 11. Review of Accounts. If applicant provides investment supervisory services, manages investment advisory accounts, or holds itself out as providing financial planning or some similarly termed services: A. Describe below the reviews and reviewers of the accounts. For reviews, include their frequency, different levels, and triggers factors. For reviewers, include the number of reviewers, their titles and functions, instructions they receive from applicant on performing reviews, and number of accounts assigned each. See Schedule F B. Describe below the nature and frequency of regular reports to clients on their accounts. See Schedule F Answer all items. Complete amended pages in full, circle amended items and file with execution page (page 1). Jos a®y Form ADV Applicant: Part 11 - Page 6 CLS Investment Firm, LLC SEC File Number: Date: 801- 57265 03/31/2007 12. Investment or Brokerage Discretion. A. Does applicant or any related person have authority to determine, without obtaining specific client consent, the: Yes No (1) securities to be bought or sold? F F Yes No (2) amount of the securities to be bought or sold? 57 r Yes No (3) broker or dealer to be used? F F (4) commission rates paid? Yes No Yes No B. Does applicant or a related person suggest brokers to clients? FO_ F For each yes answer to A describe on Schedule F any limitations on the authority. For each yes to A(3), A(4) or B , describe on Schedule F the factors considered in selecting brokers and determining the reasonableness of their commissions. If the value of products, research and services given to the applicant or a related person is a factor, describe: • the products, research and services • whether clients may pay commission higher than those obtainable from other brokers in return for those products and services • whether research is used to service all of applicant's accounts or just those accounts paying for it; and • any procedures the applicant used during the last fiscal year to direct client transactions to a particular broker in return for products and research services received. 13. Additional Compensation. Does the applicant or a related person have any arrangements, oral or in writing, where it: A. is paid cash by or receives some economic benefit (including commissions, equipment or non-research services) Yes No from a non-client in connection with giving advice to clients? F F Yes No B. directly or indirectly compensates any person for client referrals? F/ r (For each yes, describe the arrangements on Schedule F.) 14. Balance Sheet. Applicant must provide a balance sheet for the most recent fiscal year on Schedule G if applicant: • has custody of client funds or securities (unless applicant is registered or registering only with the Securities and Exchange Commission); or • requires prepayment of more than $500 in fees per client and 6 or more months in advance Yes No Has applicant provided a Schedule G balance sheet? R_ r Answer all items. Complete amended pages in full, circle amended items and file with execution page (page 1). ]OS a4~ Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part H (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) PART 11- Page 2 ITEM IA(1) CLS INVESTMENT FIRM, LLC ("CLS") provides investment advisory services in the following manner: Throughout this schedule F, "we", "us" or "our" refers to CLS and "you" or "your" refers to the client or prospective client. As used in this schedule F, "Affiliated Funds" are funds that are advised or managed by us and/or affiliated persons and "Sub-Advised Funds" are funds that are sub-advised by us. For detailed information regarding Affiliated Funds please consult the AdvisorOne Funds prospectus. For detailed information regarding Sub-Advised Funds please consult the Rydex Variable Trust prospectus. CLS is also known as Clarke Lanzen Skalla Investment Firm, LLC. ADVISORY SERVICES AND FEES. We offer investment management services for clients who wish to utilize our individualized services. Each investment service provides discretionary continuous investment advice based on your individual objectives, needs, risk tolerance, and style of desired management, utilizing various security products including: registered investment companies ("mutual funds"), variable annuities, exchange traded funds, folios, bonds, equities and/or other securities in association with the investment service selected by you. We also serve as an investment adviser to mutual funds and variable annuity funds for negotiated fees, which are paid pursuant to written advisory agreements. We will custom tailor an investment portfolio specifically designed for you based on the style of management you select. The process begins when you fill out a confidential, in-depth "Client Profile". The Client Profile will help you to clarify your financial objectives and goals, establish your tolerance to risk, and identify your most comfortable style of management. The Client Profile is used by our firm as the primary reference for managing your portfolio. You may also indicate any special instructions or limits that you wish us to follow in managing your assets. Based on our analysis of your Client Profile, we will provide to you an Investment Policy Statement ("IPS") that clarifies your specific circumstances and shows an initial asset allocation for your portfolio. The specific selections within the mutual funds, variable annuities, exchange traded funds, folios, and/or other securities represent asset classes suited to your individual risk tolerance, goals, and management style. The specific percentages allocated to each asset class may vary due to the nature of asset performance and/or the investment management service selected. Through our daily monitoring of relative strength and asset class risk factors, we may change your portfolio asset mix in order to help you meet your objectives. It is our intent to maintain a risk exposure commensurate with your objectives by using the various investment choices available under the investment management service selected by you. To help us provide accurate and timely management of your invested assets, we may ask that you establish a custodial account with a designated custodian, including Constellation Trust Company, a custodian affiliated with CLS. However, assets may be held at a number of qualified custodians, including a mutual fund, a variable annuity insurance company, or an independent Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 1 J/0 Cc~ Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. Schedule F of Applicant: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC Part II 01- 57265 103/31/2007 (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) custodian selected by you. Your custodian maintains the underlying records for the assets held in your account. We will not serve as the custodian for your managed assets. In most instances, you will be solely responsible for paying all the fees or charges of the custodian. Securities or monies may be added to or withdrawn from your managed assets at any time; however, in order for CLS to maintain accurate information regarding your account you must provide us with written notice of any such additions or withdrawals. We are not responsible for accurate reporting if you fail to provide us accurate information. We strive to maintain your account data as accurate as possible; however, we rely on accurate reporting provided to us by your custodian through electronic or other means. We are not responsible for inaccurate data provided by your custodian. You must promptly submit to us in writing any changes to the Client Profile, or any changes to any information you have provided to us regarding the management of your assets. Maintaining proper records and documentation regarding your account is important to us. As a new client of CLS, you will be able to access our web site at www.clsinvest.com and view your account information. General information regarding how to obtain secured web access to your account is given to you after we accept your account. In addition, our customer service center is available to answer any questions regarding your account at (888) 455-4244. FEES. For our investment management services, we charge an advisory fee. For most of our services, advisory fees are charged and billed in advance, either quarterly or annually, based on the market value of all your assets under management on the last trading day of each advisory fee period or as otherwise specified in your investment advisory agreement. You will also be billed for additional monies added to your account during the advisory fee period; however, no adjustments will be made to your bill for monies withdrawn. Under some investment advisory agreements, fees will be determined and payable quarterly, in arrears or determined based on your account balance on a daily basis and billed quarterly. Please refer to your investment advisory agreement, including attached addendums and schedules, to determine the manner your advisory fees will be calculated and billed. In any partial advisory fee cycle, the advisory fee will be pro-rated based on the number of days the assets are under management during the particular advisory fee period. The advisory fees paid to us represent fees for management of your account and are separate from any other fees and expenses charged by other parties; therefore, the advisory fees shown in this ADV represent only the fees paid to us and do not reflect operating expenses and other costs charged by mutual funds or variable annuities and it is important you understand that these expenses and costs are ultimately borne by you, as the shareholder. In addition, mutual funds or variable annuities may charge contingent deferred sales charges ("CDSC") on withdrawals. We are not responsible for any CDSC charges incurred through the management of your portfolio or for any transaction costs incurred while managing your assets. A complete description of all fees and expenses of the securities in which you are invested are contained in the relevant prospectuses. We also advise you to carefully review your custody agreement with your custodian as there may be custodial fees and other service fees charged to you by your custodian. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE-T-1 D~ all Schedule F of Form ADV Continuation Sheet for Form ADV Part II CLS Investment Firm, LLC 1- 57265 103/31/2007 (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC S Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) You may request that related accounts be combined in order to meet fee break points and reduce the advisory fee charged. We reserve the right to waive the advisory fee for certain accounts such as employee accounts and personal accounts of solicitors who refer business to us. The standard fee schedules and minimum account sizes indicated for the investment management services identified below are negotiable and as a result clients with similar assets may have differing fee schedules. Clients who negotiate a flat fee schedule may or may not pay a higher fee than those who pay under a tiered schedule, depending on asset levels. The same or similar investment advisory services may be available from other investment advisers for a lower fee. TERMINATION. We may terminate our investment advisory agreement with you at any time by providing you with written notice. Likewise, you may terminate the advisory agreement at any time by providing us with written notice. If the investment advisory agreement is terminated within (5) five business days from the date of inception, all fees paid in advance will be refunded to you promptly. Should the investment advisory agreement be terminated at any other time, you will receive a pro-rata refund of any prepaid fees. If you are billed in arrears for our services, any outstanding amounts owed to us for the period of time your assets were under our management shall become immediately due and payable upon termination. Upon termination of our investment management services, we will have no obligation or authority to recommend or take any action with regard to the previously managed assets. You will bear the sole responsibility to work with your custodian for proper liquidation and/or management of your assets after termination. INVESTMENT MANAGEMENT SERVICES. We offer the investment management services identified below. You are instructed to review each description to ensure you are comfortable with the style of management you select under your investment advisory agreement. Please consult our marketing materials for a current listing of platforms on which the investment management services identified below are made available. 1. Individualized Account Management Individualized Account Management (IAM) - The IAM service utilizes an adaptive risk allocation strategy. The strategy uses risk budgeting, fundamental, statistical and relative strength analysis to diversify your IAM portfolio among several different asset classes solely within the mutual fund families or variable annuities specified by you, according to your objectives determined from your Client Profile. Under most circumstances and unless otherwise specified by you, your portfolio will be managed utilizing the same share class as your existing portfolio. This service may be best suited for clients with existing assets in either load or no-load mutual funds or variable annuities. The standard fee schedule for this service is: Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 3 Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801.57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form AN Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: S Empl. Ident. No.: CLS Investment Firm, LLC r32-0070947 Item of Form Answer jAssets under Management Annual Percentage Less than $250,000 2.30% $250,000 but less than $500,000 ~ 2.05% ,$500,000 but less than $750,000 1.80% ,$750,000 but less than $1,000,000 1.55% $1,000,000 or more The minimum account size is $30,000 per fund family, per registration. Clients in the IAM service selecting to be invested solely in Affiliated Funds will receive a credit against the advisory fees otherwise payable to us for all operating expenses of the Affiliated Funds, including fund management fees paid to us. These clients have a different fee schedule as indicated below to reflect this reduction. The client may, at any time instruct us in writing, not to place any of their managed assets in Affiliated Funds. We receive a management fee from the Affiliated Funds of 1 % of the assets invested in the Affiliated Funds. For more information about the Affiliated Funds, please consult the AdvisorOne Funds prospectus. This service was previously named "Fund of Funds Portfolios". The standard (net) fee schedule for this service is: Flat Rate Annual Percentage 1.15% The minimum account size is $30,000 per registration. A variation of IAM is offered utilizing a combination of Affiliated Funds and American Funds class A shares. An initial allocation of thirty (30%) of the assets in this strategy will be invested in Affiliated Funds with the remaining balance invested in American shares. The standard IAM and Affiliated Fund fee schedules set forth above will apply based on whether the assets are in American shares or Affiliated Funds. In addition, a variation of IAM is offered utilizing a combination of Affiliated Funds and various approved fund families selected by you (IAM Hybrid). An initial allocation target of thirty (30%) of the assets in IAM Hybrid will be invested in Affiliated Funds with rebalancing occurring if the Affiliated Funds reach thirty-five (35%) of your overall portfolio. For assets placed in Affiliated Funds, you will receive a credit (offset) against advisory fees that would otherwise be payable to us, for all operating expenses of the Affiliated Funds, including fund management fees paid to us based on the highest percentage of your account assets (currently 35%) that may be invested in Affiliated Funds. The standard fee schedule below reflects this reduction. You may, at any time instruct us in writing, not to place any of your managed assets in Affiliated Funds. We receive a management fee from the Affiliated Funds of I% of the assets invested in the Affiliated Funds. For more information about the Affiliated Funds, please consult the AdvisorOne Funds prospectus. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 4 1 c~.5 ~ 13 Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item 1A of Form ADV: CLS Investment Firm, LLC RS Empl . Ident. No.: 32-0070947 Item of Form Answer (identify) The standard (net) fee schedule for this service is: p Flat Rate Annual Percentage 1.80% i The minimum account size is $30,000 per registration. 2. Customized Portfolio Management Customized Portfolio Management (CPM) - The CPM service utilizes an adaptive risk allocation strategy. The strategy uses risk budgeting, fundamental, statistical and relative strength analysis of multiple fund families of no-load and load mutual funds available at Net Asset Value (NAV), exchange traded funds (ETFs), Folios (Folios are baskets of individual securities), and/or other types of securities to diversify your portfolio among several different asset classes according to your objectives determined from your Client Profile utilizing a core and satellite approach. This strategy utilizes Affiliated Funds to accomplish its objectives. Generally, the core portion of this portfolio will be invested in Affiliated Funds and the satellite portion will be invested in non- Affiliated Funds, Folios and/or other types of securities, which may include individual stocks. This service may be best suited for clients wishing to invest across multiple fund families, ETFs and/or other securities. Currently, seventy five percent (75%) of the assets in this strategy will be invested Affiliated Funds, with automatic rebalancing if Affiliated Funds reach eighty percent (80%) of your overall CPM portfolio. However, subject to notice and your consent, we may modify the strategy to place up to one hundred percent (100%) of the assets in Affiliated Funds; similarly, we may add or delete Affiliated Funds from the strategy with notice to you. For assets placed in Affiliated Funds, you will receive a credit (offset) against advisory fees that would otherwise be payable to us, for all operating expenses of the Affiliated Funds, including fund management fees paid to us, based on the highest percentage of account assets (currently 80%) that can be invested in Affiliated Funds. The standard fee schedule below reflects this reduction. You may, at any time instruct us in writing, not to place any of your managed assets in Affiliated Funds. We receive a management fee from the Affiliated Funds of 11% of the assets invested in the Affiliated Funds. For more information about the Affiliated Funds, please consult the AdvisorOne Funds prospectus. A variation of the CPM investment service is also available for clients indicating an interest in holding sector funds. The standard (net) fee schedule for this service is: j Flat Rate Annual Percentage 1.50% The minimum account size is $50,000 per registration. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 5 Schedule F of Form ADV Continuation Sheet for Form ADV Part II CLS Investment Firm, LLC 1- 57265 103131/2007 (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) 3. Customized Portfolio Management 3 Customized Portfolio Management 3 (CPM3) - The CPM3 service is a strategy in which we utilize a "core" and "satellite" methodology. The core portion is managed utilizing an adaptive risk allocation strategy, which uses risk budgeting, fundamental, statistical and relative strength analysis. Generally, the core portion of this portfolio will be invested in Affiliated Funds or Sub-Advised Funds and the satellite portion will be invested in non-Affiliated Funds and/or other securities designed to take advantage of various industry sectors with a goal to capitalize on growing market segments. The CPM3 service is available on select mutual fund platforms or within select variable annuities. Under CPM3, part of your assets may be managed utilizing investment research and portfolio models provided by third parties; therefore, a portion of the advisory fee paid by you to us may be used by us to compensate these third party providers. This service may be best suited for clients seeking to diversify their assets while taking advantage of industry sectors. Currently, seventy five percent (75%) of the assets in this strategy will be invested in Affiliated Funds, or invested in Sub-Advised Funds, with automatic rebalancing if Affiliated Funds or Sub-Advised Funds reach eighty percent (80%) of your overall CPM3 portfolio. However, subject to notice and client consent, we may modify the strategy to place up to one hundred percent (100%) of the assets in Affiliated Funds or Sub- Advised Funds; similarly, we may add or delete Affiliated Funds or Sub-Advised Funds from the strategy with notice to you. For assets placed in Affiliated Funds, you will receive a credit (offset) against advisory fees that would otherwise be payable to us, for all operating expenses of the Affiliated Funds, including fund management fees paid to us, based on the highest percentage of account assets (currently 80%) that can be invested in Affiliated Funds. For assets placed in Sub-Advised Funds, you will receive a credit (offset) against advisory fees that would otherwise be payable to us, for all management fees received by us from the Sub-Advised Funds. The standard fee schedule below reflects these reductions. You may, at any time instruct us in writing, not to place any of your managed assets in Affiliated Funds or Sub-Advised Funds. For more information about the Affiliated Funds or Sub-Advised Funds, consult the relevant prospectus. The standard (net) fee schedule for this service is: Flat Rate Annual Percentage 1.50% The minimum account size is $50,000 per registration. 4. Sector Allocation Strategies Sector Allocation Strategies (Sector) - The Sector strategies are tactical asset allocation strategies that utilize investment research and models provided by Capital Cities Asset Management, Inc. This service applies a relative strength analysis to the universe of available Rydex Series Funds on designated investment platforms. The Sector strategy is an aggressive strategy that rotates the assets among the various industry capitalization and country specific funds that demonstrate strong relative strength. This strategy may exhibit a higher degree of Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 6 Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item 1A of Form ADV: CLS Investment Firm, LLC S Empl. Ident. No.: r32-0070947 Item of Form Answer (identify) price volatility because it involves investing in sector funds that can be more volatile than diversified equity funds. This strategy may be fully invested in equity funds, including leverage and inverse funds, but may take up to a 100% defensive position (which may include a 100% position in the money market). The Sector strategy is also available within the Security Benefit AdvisorDesigns variable annuity or the Nationwide Americas MarketFLEX variable annuity. This service is most appropriate for clients with a higher tolerance for risk. The standard fee schedule for this service is: Assets under Management F Annual Percentage Portion under $500,000 2.50% - 2.00% Portion over The minimum account size is $30,000 per registration. 5. Vision Allocation Strategies Vision Allocation Strategies (Vision) - The Vision strategies are tactical asset allocation strategies that utilize investment research provided by Capital Cities Asset Management, Inc. Under Vision your assets are rotated among the available funds offered on a platform provided by Rydex Financial Services. The Vision strategies may be fully invested, but can take up to a 100% defensive position (which may include up to 100% position in the money market). This service may be best suited for clients wishing to invest across multiple fund families, utilizing tactical asset allocation. Two options of this strategy are available as follows: Vision Country Total Return Strategy. This strategy is an active global allocation strategy, and the investment of the assets can rotate among approximately 500 no-load, no transaction fee funds. This strategy attempts to target the strongest performing mutual funds according to relative strength analysis. This global allocation strategy strives to keep clients invested in at least three of the following asset classes: Domestic, International Specialty, Emerging Markets, Europe, International Equity, International Healthcare, International Real Estate, International Technology, International Utilities, Latin America, Money Market, and Pacific Rim. The objective of this strategy is to seek to outperform the average growth fund over the short term (1 to 5 years) and 90% of all growth funds over the long term (more than 5 years). Vision Total Return Strategy. This strategy attempts to target the strongest performing mutual funds across several asset classes; including, domestic equity funds, domestic bond funds, global bond funds, hard asset funds, industry funds, sector funds, and money market funds. The objective of this strategy is to seek to outperform the average growth fund over the short term (1 to 5 years) and 90% of all growth funds over the long term (more than 5 years). This strategy is offered at select mutual fund companies and variable annuities. The equity assets are typically invested in a minimum of four asset classes. The standard fee schedule for this service is: Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 7 Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: 7 CLS Investment Firm, LLC S Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) Assets under Management _ Annual Percentage Portion under $500,000 Portion over $500,000 I 2.00% The minimum account size is $30,000 per registration. 6. Fund Allocation Investment Plan Fund Allocation Investment Plan (FAIP) - The FAIP service is a tactical asset allocation strategy that utilizes investment research and models provided by Capital Cities Asset Management, Inc. This strategy utilizes an active allocation approach where the object is to outperform the average growth fund over the short term (1 to 5 years) and 90% of all growth funds over the long term (more than 5 years) for the equity portion of the portfolio. It seeks to maximize the clients return over time and to preserve their capital during market declines by keeping the money invested in the strongest asset groups with the mutual fund/variable annuity chosen by the client and his/her broker-of-record based upon the clients investment criteria. A relative strength analysis is used to determine the proper allocation and individual fund strategy and each funds trend for risk management. This service may be best suited for clients with existing positions in mutual funds or variable annuities. The FAIP strategy may be fully invested, but can take up to a 100% defensive position (which may include up to 100% position in the money market). The Capital appreciation objective for this strategy is most appropriate for clients with a higher tolerance for risk. The standard fee schedule for this service is: Assets under Management ~ Annual Percentage Portion under $500,000 Portion over $500,000 2.00% The minimum account size is $30,000 per registration. 7. Retirement Solutions Retirement Solutions - The Retirement Solutions strategy utilizes products offered through selected investment platforms and is designed for qualified plans that are trustee directed and/or permit plan participants the ability to self direct their own investments and select customized professional investment management of their individual plan assets. Through the Retirement Solutions strategy, we offer our Individualized Account Management, Customized Portfolio Management, Customized Portfolio Management 3, IAM Hybrid and certain Vision Allocation Strategies to plan sponsors and/or their plan participants for negotiated fees on select platforms. The standard fees for this strategy are described under the respective strategies set forth above. The Retirement Solutions strategy is currently offered on several different platforms including Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 8 1bs a~7 Cc) Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. Schedule F of Applicant: EC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part H (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item 1A of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) the Nationwide Financial and The Best of America Retirement Resource trading platform, which includes a selection of hundreds of mutual funds offered by different fund families, as approved by Nationwide. Nationwide Life Insurance Company or Nationwide Trust Company, FSB serves as the custodian of the client assets. Record keeping is performed by Nationwide and their third party administrator partners and enables participants to access their accounts through a specially designed Internet web site. CLS has entered into an arrangement with Registered Investment Advisor Services, Inc. to perform certain back office services and perform certain record keeping functions in administering this service. Other platforms include those provided by MG Advisory Services, L.L.C., MG Trust Company, LLC and Matrix Settlement & Clearance Services, L.L.C.; Security Financial Resources, Inc., and Security Distributors, Inc.; and other platforms as indicated in our current marketing materials. 8. Separate Account Strategy Separate Account Strategy - The Separate Account Strategy is a strategy in which you will be invested in exchange traded funds (ETFs), bonds, individual securities and/or mutual funds with CLS acting as the asset allocation overlay manager. Different variations of this strategy are described below. The overall portfolio will utilize an adaptive risk allocation strategy, which uses risk budgeting, fundamental, statistical and relative strength analysis, to determine the proper allocation of the portfolio among the various investment vehicles. Based on your individual investment objectives, we may honor special requests regarding available mutual funds, ETFs and/or other securities to be utilized as well as investment research providers and sub-advisers to utilize. For accounts over $350,000 we offer a Separate Account Strategy wrap fee program where the brokerage trading costs are not billed separate to the client. Please consult our Schedule "H" Wrap Program Brochure for details regarding this service. a. ETF Portfolios. ETF Portfolios utilize an adaptive risk allocation strategy. The strategy uses risk budgeting, fundamental, statistical and relative strength analysis to diversify your portfolio primarily among exchange traded funds (ETFs) through investment platforms at designated custodians, according to your objectives determined from your Client Profile. This service may be best suited for clients wishing to invest across multiple ETFs. The ETF Portfolios may also use mutual funds for certain asset classes not readily accessible in ETF products. This service was previously named "Exchange Traded Fund Portfolios". The standard fee schedule for this service is: Flat Rate Annual Percentage 2.00% The minimum account size is $100,000 per registration. For accounts over $350,000 please refer to the Schedule H Wrap Program Brochure. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 9 dos af~ n Coovriaht 2007. National Reaulatorv Services. All Riohts Reserved. Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801.57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: S Empl. Ident. No.: CLS Investment Firm, LLC 32-0070947 Item of Form Answer (identify) b. ETF/Bond Portfolios. The ETF/Bond Portfolios will primarily utilize ETFs and/or individual taxable or non-taxable bonds and may be sub-advised by third parties selected by CLS as indicated in your Investment Advisory Agreement or managed utilizing investment research and portfolio models provided by third parties; therefore, a portion of the advisory fee paid by you to us may be used by us to compensate these third party providers. Your portfolio allocation will be based on your individual characteristics as determined from your Client Profile. This service may be best suited for clients wishing to have greater control over cash flow streams and/or greater visibility to the actual holdings of the portfolio. The standard (tiered) fee schedule for this service is: Assets under Management Annual Percentage $350,000 but less than $1,000,000 1.65% --N-~ lNr-ext $500,000 1.60% 1.55% Next -rm-.__ore !$5, 000,000o 1 45% The minimum account size is $350,000 per registration. Please refer to the Schedule H Wrap Program Brochure. c. ETF/Bond/Equity Portfolios. The ETF/Bond/Equity Portfolios will primarily utilize ETFs, individual taxable or non-taxable bonds and/or equities and may be sub-advised by third parties selected by CLS as indicated in your Investment Advisory Agreement or managed utilizing investment research and portfolio models provided by third parties; therefore, a portion of the advisory fee paid by you to us may be used by us to compensate these third party providers. Your portfolio allocation will be based on your individual characteristics as determined from your Client Profile. This service may be best suited for clients wishing to have greater control over portfolio transactions, cash flow streams and/or greater visibility to the actual holdings of the portfolio. This service may also be adjusted for clients seeking current or growing income. The income portfolios will be designed to take advantage of income producing securities by constructing well-diversified portfolios. The stock portion of each income portfolio uses an enhanced index strategy designed to track many characteristics of the S&P 500 Index, but utilizing high dividend yielding stocks. The bond portion of each income portfolio will focus on open and closed end bond funds offering a superior yield. The bond portion may be highly concentrated in high yield bonds or long-term government bonds due to their historically high yields, but the goal will be to diversify the bond portfolio while maintaining focus on the primary objective of high or growing yield. ETFs may also be used in this strategy. This service may be best suited for clients seeking to use their portfolio as a source of current income. This service was previously named "Income Portfolios". The standard (tiered) fee schedule for this service is: Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 10 1 a_G al ~ Cc) Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. Schedule F of Applicant: EC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Norm ADV Part 1 or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC S Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) 1ASeii under Management Annual Percentage $350,000 but less than $500,000 1.95% Next $500,000 1 90% Next -1.85% Next $1,500,000 1.80% 1Next $2,000,000 _ _ ! 1.75% 1$5,000,000 or more I 1.65% The minimum account size is $350,000 per registration. Please refer to the Schedule H Wrap Program Brochure. Any of the services under the Separate Account Strategies identified above may be tailored for clients with tax concerns utilizing an adaptive risk allocation strategy. The same fee schedules as set forth above will apply, subject to a minimum account size of $350,000. The strategy uses adaptive risk allocation but emphasizes diversification very heavily because lower turnover enhances our ability to minimize taxes. Portfolios are managed focusing on minimizing taxable gains, especially long and short-term gains. An asset allocation will be prepared utilizing primarily ETFs, individual equities and/or municipal bonds. Depending on the size of the account, the municipal bonds may be purchased in the form of individual bonds or mutual funds. Tax managed mutual funds and index mutual funds may also be used depending on your individual objectives. Trend Analysis will be used to evaluate the allocation, but the changes will be less drastic and done to match your particular tax situation. The goal, when possible, is to offset gains with losses and to realize long-term capital gains when it is prudent to realize gains in the portfolio. This service may be best suited for clients concerned about tax considerations. Listed below are descriptions of services offered to accommodate clients with certain investment restrictions. Multi-Selection Portfolios - The Multi-Selection service is a strategy in which you will be invested in multiple mutual funds, exchange traded funds (ETFs), and/or other securities through investment platforms at designated custodians. The service utilizes an adaptive risk allocation strategy, which uses risk budgeting, fundamental, statistical and relative strength analysis of multiple fund families of no-load and load mutual funds available at Net Asset Value ("NAV"), ETFs and/or other securities. You may impose restrictions limiting or specifying the available selection of mutual funds, ETFs, and/or other securities to be used by this service. This service may be best suited for clients wishing to invest across multiple fund families or wishing to impose certain restrictions on the types of security products to be used in their portfolio. Investment decisions will then be made according to your objectives determined from your Client Profile. Clients with socially responsible investment restrictions will be limited to investments in security products that have established investment restrictions to those companies that operate in a "just, peaceful, healthy, and environmentally sound purposes and away from destructive uses" (as defined by the Green Money Journal). Some accounts under this service where previously marketed under the name "Socially Responsible Portfolios" and "Dynamic Exchange Portfolios". Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE I 1 105 d 0 Cc) Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. Schedule F of Form ADV Continuation Sheet for Form ADV Part II CLS Investment Firm, LLC p 1- 57265 103/31/2007 (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item 1 A of Form ADV: _ CLS Investment Firm, LLC ffRS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) The standard fee schedule for this service is: Assets under Management - Annual Percentage Less than $250,000. 1 j$250,000 but less than $500,000 I 1.50% $500,000 but less than $750,000 ~ 1.35% $750,000 but less than $1,000,000 1.20% $1,000,000 or more 1.00% The minimum account size is $50,000 per registration. CLS also serves as the sub-advisor to a Socially Responsible Investment Program for First Affirmative Financial Network, LLC ("FAFN") under the service name "Dynamics". Information and fee schedules for this service are available through FAFN. CLS may also serve as sub-adviser to other registered investment advisers offering its services described above on a private labeled basis. Listed below are descriptions of existing services that are not actively marketed to new clients. Explore Strategy (Explore) - The Explore Strategy is available on the Nationwide MarketFLEX platform and utilizes a core and satellite methodology. The core portion of the portfolio is invested in various mutual funds managed by utilizing CLS' adaptive risk allocation investment methodology, which utilizes risk budgeting, fundamental, statistical and relative strength analysis. The satellite portion will be invested primarily utilizing Rydex funds designed to take advantage of various industry sectors with a goal to capitalize on growing market segments. Under the Explore Strategy part of your assets may be managed utilizing investment research and portfolio models provided by third parties; therefore, a portion of the advisory fee paid by you to us may be used by us to compensate these third party providers. This service may be best suited for clients seeking to diversify their assets while taking advantage of industry sectors. The standard fee schedule for this service is: Flat Rate Annual Percentage Flat Rate Annual Percentage 2.00% _ i Minimum investment of $50,000 with a minimum account size of $25,000 per third party research Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 12 05 a d Cc~ Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. Schedule F of Applicant: SEC File Number: ate: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC RS Empl . Ident. No.: 32-0070947 Item of Form Answer (identify) provider utilized. NOTICE TO CLIENTS. You should know that it is impossible to predict the future; there is no assurance that we will attain your objectives or that any investment recommendation will be profitable. Selecting one of the investment services described above may result in different performance results than what otherwise might have been achieved had you selected one of the other services. In addition, clients in the same investment service may have differing performance depending upon the individual investment objectives and risk tolerance of each client. Should you wish to change investment services, you must notify us in writing. You are advised that several of the services offered by us involve the use of Affiliated Funds or Sub-Advised Funds to implement our strategies. The use of the Affiliated Funds or Sub- Advised Funds may present a conflict of interest and is therefore disclosed in the applicable service descriptions. Several of the services utilize the Affiliated Funds or Sub-Advised Funds as an integral part of its strategy; however, you may at any time prohibit us from using such funds, or select a different investment management service by providing us written notice. PRIVACY POLICY. We recognize and respect the privacy of each of our customers and their expectations for confidentiality. The protection of customer information is of fundamental importance in our operation and we take seriously our responsibility to protect nonpublic personal information. We collect, retain and use information that assists us in providing the best service possible. This information comes from the following sources: • Account applications and other required forms, • Written, oral, electronic or telephonic communications and • Account and transaction histories with us, our affiliates, or others We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to nonpublic personal information about you to those employees, affiliates, and service providers who need to know that information to provide our products or services to you. We require that these entities limit the use of the information provided to the purposes for which it was disclosed and as permitted by law. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 13 n Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. It ds Schedule F of Applicant: EC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC S Empl. Ident. No.: r32-0070947 Item of Form Answer (identify) PROXY POLICY. We do not receive proxies for securities held in your accounts. It is our policy not to vote, nor give any advice how to vote, proxies for securities held in your accounts. Proxies for securities held in your accounts will be received by you directly from the custodian of your assets, or will be handled as otherwise agreed between you and the custodian. Proxies for the AdvisorOne Funds CLS serves as investment adviser to certain investment companies under the AdvisorOne Funds trust (each a "Fund"). Each Fund is a fund of funds, meaning these Funds pursue their investment goals by investing primarily in other investment companies that are not affiliated ("Underlying Funds"). As a fund of funds, the Funds are required by the Investment Company Act to handle proxies received from Underlying Funds in a certain manner. In particular it is the policy of CLS to vote all proxies received from the Underlying Funds in the same proportion that all shares of the Underlying Funds are voted, or in accordance with instructions received from Fund shareholders, pursuant to Section 12(d)(1)(F) of the Investment Company Act. All proxies received from Underlying Funds will be reviewed with the Chief Compliance Officer or appropriate legal counsel to ensure proper voting. After properly voted, the proxy materials are placed in a file maintained by the Chief Compliance Officer for future reference. PART II - Page 2 ITEM IA(3) INVESTMENT ADVICE THROUGH CONSULTATION. We offer investment research, economic analysis and portfolio design based on adaptive risk allocation using model allocations. Allocations are based on risk tolerance, risk budgeting and/or stock-to-bond ratios. These services are available to other persons or entities for a negotiable fee. Fees typically start at 40 basis points (.40%) but may be negotiated higher or lower depending on levels of assets under management. Under some circumstances, an annual charge applies for set up and maintenance. In addition, CLS may offer portfolio design utilizing Affiliated Funds or Sub-Advised Funds for little or no cost to other investment advisers and broker/dealers. PART II, Page 2 - ITEM 2G TYPES OF CLIENTS. We may provide advice to other persons or entities including other investment advisers and broker/dealers. PART II, Page 3 ITEM 3L TYPES OF INVESTMENTS. We advise individual clients regarding mutual funds, variable annuities, variable life products, and exchange traded funds. Under some circumstances we may advise clients regarding other securities, such as individual stocks, bonds and Folios. We also advise mutual funds regarding all indicated types of investments, as well as repurchase agreements, foreign securities, master demand notes, and other securities permitted for investment by the fund's registration statement. Investment strategies and policies as well as risks are included and described in the relevant Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 14 CC) Coovriaht 2007. National Reaulatorv Services. All Riahts Resed. ~0 1 Or e Schedule F of Applicant: EC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801.57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC S Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) prospectus and registration statement(s). PART II, Page 3 ITEM 4A METHODS OF ANALYSIS, SOURCES OF INFORMATION, AND INVESTMENT STRATEGIES. (S) Assets in our Individualized Account Management, Customized Portfolio Management, Customized Portfolio Management 3, Separate Account Strategy and Multi-Selection Portfolios are managed utilizing an adaptive risk allocation investment methodology. Adaptive risk allocation is a unique combination of asset allocation and risk management that consists of four (4) elements: diversification, risk budgeting, relative strength and asset class risk analysis. Diversification is the process of placing a percentage of your portfolio to different areas of the market. CLS uses market risk and trend analysis in conjunction with your individual goals and risk budget to determine which sectors of the market are right for your portfolio. Risk budgeting is the spending allowance we allow for your portfolio. The risk associated with each investment is carefully considered before it is added to your portfolio. Under risk budgeting, you are assigned a risk budget and each security (fund) is assigned a risk value primarily based on volatility. Risk budgeting allows for investments of different types to be compared and ensures your allocations are better in line with your objectives. Because we utilize risk budgeting and the investment choices available have varying risk levels, if you are assigned a stock-to-bond ratio, it will deviate around a target stock-to-bond ratio. At times, we may increase positions in money market funds, bond funds, balanced funds, or lower risk equity funds which may cause a further deviation from your target stock-to-bond allocation. Relative Strength is the momentum and duration of a trend, either up or down. The relative strength of each asset is carefully considered on a risk-adjusted basis. CLS typically places the greatest emphasis on trend periods of about 4 to 5 months in length. Asset Class Risk Analysis determines when it is best to stay invested in a particular asset and when it is time to reallocate to an asset class with a better risk/reward potential. Assets in our Sector Allocation Strategies, Vision Allocation Strategies, and Fund Allocation Investment Plan are managed using asset allocation research advice and models provided by Capital Cities Asset Management, Inc. These assets will be allocated based on the monitoring of overall market conditions including price trends, monetary conditions, market momentum indicators, relative strength analysis, financial publications, etc. The objective of the tactical asset allocation is to manage risk by attempting to preserve capital during declining markets and promote growth of capital in rising markets. Assets in our Explore Strategy and certain assets in our Individualized Account Management, Customized Portfolio Management 3 and Separate Account Strategy are managed using asset allocation research advice and models provided by various third parties. In addition, a portion of the assets in our Separate Account Strategy may be sub-advised by third parties. PART II, Page 3 ITEM 4B(8) OTHER SOURCES OF INFORMATION. In addition to the sources of information identified under Item 4B, we use data retrieved from companies via electronic sources. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 15 Coovriaht 2007. National Reaulatorv Services. All Rights Reserved. aj4 b-5 Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801.57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC PRS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) In certain strategies we may utilize investment research, portfolio models or investment advice from unaffiliated third parties. All investment management expenses incurred from these third parties will be paid by us. In the Separate Account Strategy, we may hire sub-advisers to manage part of your account. PART 11, Page 3 ITEM 4C(7) INVESTMENT STRATEGIES. Our asset allocation strategies seek to be invested in the asset classes that are exhibiting the best characteristics for sustained market leadership and overweight or underweight asset classes in accordance with your individual objectives, risk budget, and the investment service selected by you. PART 11, Page 4 ITEM 5 EDUCATION AND BUSINESS STANDARDS. We believe that providing investment advice is a very complex and specialized field and therefore we expect those individuals who determine or give investment advice for us to meet certain minimum educational requirements. We require our investment committee members to have earned a college degree and have had previous experience in securities analysis. PART 11, Page 4 ITEM 6 EDUCATION AND BUSINESS BACKGROUND. W. PATRICK CLARKE Year of Birth: 1945 Formal Education after high school: Mr. Clarke received a Bachelor of Science degree from Brigham Young University. Business Background for the preceding five years: Co-owner of NorthStar Financial Services Group, LLC (since 1/2003); Chief Executive Officer, Manager and Investment Committee member of CLS (since 4/2003); Manager of: Gemini Fund Services, LLC, Orion Advisor Services, LLC, and Aquarius Fund Distributors, LLC (AFD), and each of their respective predecessors (since 2/2003); President of AdvisorOne Funds (since 5/2003); Manager of Forum Financial Consultants, LLC (since 3/2004); Manager of Gemcom, LLC and Fund Compliance Services, LLC (since 7/2004); Director of Constellation Trust Company (since 12/2004); Registered Principal with AFD and its predecessor (since 2/2003); and member of the International Association of Financial Planning (since 1995). Mr. Clarke's recent past experience includes: President of AFD (1/2005 to 5/2005); Director of Apollo Distribution, Inc. (2/2003 to 12/2003); President, Chief Executive Officer, Director and Investment Committee member of CLS' predecessor (1989 to 4/2003); President and Director of Orbitex Advisor Services, Inc. and its predecessor, AdvisorLynx Solutions, Inc. (12/1999 to 2/2003); Director of Orbitex Data Services, Inc. (5/2001 to 4/2002); President and Director of Orbitex Funds Distributor, Inc., and its predecessors, CLS Distributors, Inc., and CLS Brokerage Services, Inc. (from 1996 to 2002); and Chairman, Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 16 (c~ Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. Schedule F of Form ADV Continuation Sheet for Form ADV Part II ant: CLS Investment Firm, LLC 01- 57265 103/31/2007 (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC 1 RS Empl. Ident. No.: 1 32-0070947 Item of Form Answer (identify) President and Trustee of the AdvisorOne Funds (from 1997 to 2000). Since 1972, Mr. Clarke has been associated with the finance and investment field and in 1989 he founded CLS' predecessor, and has been the guiding force behind its growth. DENNIS R. GUENTHER, CFA Year of Birth: 1973 Formal Education after high school: Mr. Guenther received his Bachelor of Science degree in Finance from Wayne State College. In 2006 Mr. Guenther earned the Chartered Financial Analyst Designation ("CFA") from the CFA Institute (formerly the Association for Investment Management and Research). Business Background for the preceding five years: Senior Portfolio Manager and Investment Committee member with CLS (since 5/2004); and Registered Representative of Aquarius Fund Distributors, LLC and its predecessor (since 11/2003). Mr. Guenther's recent past experience includes: Financial Analyst of CLS (from 10/2002 to 5/2004); Database/Interface Management with CLS (from 7/1997 to 10/2002); and Registered Representative of Orbitex Funds Distributors, Inc. (from 3/2001 to 11/2003). ROBERT M. JERGOVIC, MBA, CFA Year of Birth: 1954 Formal Education after high school: Mr. Jergovic received a Bachelor of Science degree in Business Administration from the University of Nebraska at Lincoln and then received a Master of Business Administration in Finance and Banking from the University of Nebraska Graduate College. In 1981 Mr. Jergovic earned the Chartered Financial Analyst Designation ("CFA") from the Association for Investment Management and Research. Business Background for the preceding five years: Chief Investment Officer and Chairman of the Investment Committee of CLS and its predecessor (since 3/2002); and Registered Representative of Aquarius Fund Distributors, LLC and its predecessor (since 11/2003). Mr. Jergovic's recent past experience includes: Registered Representative of Orbitex Funds Distributor, Inc. (from 2001 to 11/2003); and Portfolio Manager and Investment Committee member with CLS' predecessor (from 11/2000 to 3/2002). Prior to joining CLS, Mr. Jergovic served as a Registered Representative for PFG Distribution Company (from 1998 to 1999) and Vice President of Investment Management and Assistant Treasurer for Guarantee Life Insurance Company (1994 to 2000). SCOTT R. KUBIE, MBA, CFA Year of Birth: 1967 Formal Education after high school: Mr. Kubie received his Bachelor of Arts degree in Economics Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 17 Cc) Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801.57265 03/31/2007 Part II (Vo not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item 1 A of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 11 32-0070947 Item of Form Answer (identify) from Trinity University and attained his Master of Arts degree in Business Administration from the University of Nebraska at Omaha. In 1999 Mr. Kubie earned the Chartered Financial Analyst Designation ("CFA") from the Association for Investment Management and Research. Business Background for the preceding five years: Executive Vice President and Chief Strategist (since 6/2005); Director of Research for CLS and its predecessor (since 3/2002); Portfolio Manager and Investment Committee member with CLS and its predecessor (since 3/2001); Registered Representative of Aquarius Fund Distributors, LLC and its predecessor (since 11/2003) and Adjunct Professor, University of Nebraska Omaha (since 1/2006). Mr. Kubie's recent past experience includes: President and Manager of CLS and its predecessor (2/2003 to 6/2005); Portfolio Manager with CLS' predecessor (from 1995 to 1999); and Registered Representative of Orbitex Funds Distributor, Inc. (from 3/2001 to 11/2003). Mr. Kubie worked as a consultant for an Equity Manager and Internet Investment Software Firm (from 1999 to 2001), during such time he also continued to work with CLS in a consulting capacity. JENNIFER J. SCHENKELBERG, MBA, CFA Year of Birth: 1974 Formal Education after high school: Ms. Schenkelberg graduated from Kansas State University in 1997 with a Bachelor of Science degree in Business Administration with an emphasis in Accounting and Finance. In 2002 Ms. Schenkelberg earned the Chartered Financial Analyst Designation (CFA) from the Association for Investment Management and Research. In 2006, Ms. Schenkelberg attained her Master of Business Administration from Creighton University. Business Background for the preceding five years: Senior Portfolio Manager and Investment Committee member with CLS (since 12/2004). Prior to joining CLS, Ms. Schenkelberg served as Senior Financial Analyst for First National Bank of Omaha Wealth Management Group (from 1998 to 2004) and Management Trainee for First National Bank of Omaha (from 1997 to 1998). BRANDON D. MASON Year of Birth: 1983 Formal Education after high school: Mr. Mason received his Bachelor of Science in Business Administration with a major in finance from Creighton University in 2005 and is currently pursuing his Masters of Business Administration and Masters of Security Analysis and Portfolio Management at Creighton University. Business Background for the preceding five years: Portfolio Manager for CLS (since 12/2005); and Registered Representative of Aquarius Fund Distributors, LLC (since 12/2005). Mr. Mason's recent past experience includes: Portfolio Administrator for CLS (from 6/2005 to 12/2005). Mr. Mason was the Director of Investments for a group of independent financial planners (from 10/03-6/05). Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 18 Cc~ Convriaht 2007. National Reaulatorv Services. All Riahts Re 1 C6 served. ~a-) Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) TODD CLARKE Year of Birth: 1969 Formal Education after high school: Mr. Clarke graduated from Brigham Young University in 1992 with a Bachelor of Science degree in Business Management. Business Background for the preceding five years: President and Manager of CLS (since 6/2005). Mr. Clarke's recent past experience includes: Executive Vice President of Sales for CLS and its predecessor and for NorthStar Financial Services Group, LLC (from 2/2003 to 2/2006); President and Director for Apollo Distribution, Inc. (from 2/2003 to 12/2003); and Vice President of Sales, Secretary and Director for CLS' predecessor (from 2/1998 to 12/2002). BRIAN NIELSEN, JD Year of Birth: 1972 Formal Education after high school: Mr. Nielsen graduated from Brigham Young University in 1997 with a Bachelor of Science degree in Accounting and earned his Juris Doctor degree from the University of Nebraska College of Law in 2001. Business Background for the preceding five years: Chief Compliance Officer for CLS (since February 2005); General Counsel and Secretary of CLS and its predecessor (since September 2001); General Counsel and Secretary for NorthStar Financial Services Group, LLC, Orion Advisor Services, LLC (and its predecessor) and Aquarius Fund Distributors, LLC (and its predecessor) (since 1/2003); Secretary and Chief Legal Officer of the AdvisorOne Funds (since 2/2003); President, Manager and Principal of Aquarius Fund Distributors, LLC (since December 2005); Secretary and General Counsel for Constellation Trust Company (since 11/2004); Assistant Secretary for Gemini Fund Services, LLC and its predecessor (since 2/2003); and Assistant Secretary for Fund Compliance Services, LLC and Gemcom, LLC (since 7/2004). Mr. Nielsen's recent past experience includes serving as Secretary and General Counsel for Apollo Distribution, Inc. (from 2/2003 to 12/2003). Mr. Nielsen attended law school at the University of Nebraska College of Law (from 8/1998 to 5/2001). OTHER BUSINESS ACTIVITIES. PART II, Page 4 ITEM 7C Some of the principal executive officers of CLS perform services for other companies affiliated with CLS. CLS is a subsidiary of NorthStar Financial Services Group, LLC (NorthStar). NorthStar also has the following subsidiaries: Aquarius Fund Distributors, LLC, Orion Advisor Services, LLC, Gemini Fund Services, LLC, Gemcom, LLC and Fund Compliance Services, LLC. In addition, NorthStar is affiliated with Constellation Trust Company, a Nebraska chartered trust company. Patrick Clarke serves as co-chairman for NorthStar and devotes a portion of his time overseeing the other NorthStar affiliated companies. Brian Nielsen devotes approximately % of his time on matters related to CLS and 1/2 of his time to the other NorthStar affiliated companies. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 19 Cc~ Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. las aa~ Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item 1A of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) OTHER FINANCIAL INDUSTRY ACTIVITIES OR AFFILIATIONS. PART II, Page 4 ITEM 8C(l) BROKER-DEALER Related Persons: Aquarius Fund Distributors, LLC (AFD) Relationships and Arrangements with Related Persons: The principal executive officers and other related employees of CLS are officers, managers, and/or registered representatives of AFD, a registered broker-dealer and NASD member. These individuals will be able to effect limited securities transactions for advisory clients, and AFD may receive separate and customary compensation for this activity and may pay a portion of the compensation to these individuals. In some circumstances, AFD may receive customary compensation from mutual fund companies and/or variable annuity companies, including 12b-1 fees, for performing certain administrative and/or shareholder servicing related tasks associated with a CLS client's investments in such securities. AFD's securities business is limited to mutual fund shares and variable insurance contracts. AFD also acts as underwriter to various investment companies including the AdvisorOne Funds. Both CLS and AFD are wholly owned subsidiaries of NorthStar Financial Services Group, LLC. PART II, Page 4 ITEM 8C(2) INVESTMENT C O M P A N I E S Related Persons: AdvisorOne Funds & Rydex Variable Trust Relationships and Arrangements with Related Persons: We serve as the investment adviser to the Amerigo Fund, Clermont Fund, Berolina Fund, Descartes Fund and the Liahona Fund which are part of the AdvisorOne Funds ("Affiliated Funds"). We receive a management fee from the Affiliated Funds we advise. A specified amount of client assets may be invested in Affiliated Funds as an integral part of some of our investment services or if we believe it to be in the client's best interest. Clients have the right, at any time, to prohibit us from investing any of their managed assets in Affiliated Funds. We receive an annual management fee of 1 % from the Affiliated Funds. We also serve as sub- adviser to the CLS AdvisorOne Funds (the Amerigo Fund, Clermont Fund and Berolina Fund) each a series of the Rydex Variable Trust (the "Sub-Advised Funds"). We receive an annual sub-advisory fee of 40 basis points for providing sub-advisory services to the Sub-Advised Funds. In addition, our affiliated broker/dealer, AFD, receives a portion of the shareholder servicing and/or 12b-1 fees paid by the Sub-Advised Funds. PART II, Page 4 ITEM 8C(6) TRUST COMPANY Related Persons: Constellation Trust Company Relationships and Arrangements with Related Persons: Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 20 n Coovriaht 2007. National Reaulatorv Services. All Rlahts Reserved. 105 aaq Schedule F of Applicant: bbl; me ivumoer: ate: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for norm AUV Fart 1 or any otner scneauies.) 1. Full name of applicant exactly as stated in Item 1A of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 11 32-0070947 Item of Form Answer (identify) Constellation Trust Company ("CTC") is a Nebraska chartered trust company and an affiliate of CLS. Some of the principal executive officers of CLS also serve as officers and Directors of CTC. CTC serves as custodian for many of CLS' clients and has developed a joint application with CLS to facilitate the client application process. CTC's custodial services facilitate clients who desire a third party investment adviser such as CLS to manage their account(s). CLS may recommend CTC to its clients. CTC has established electronic interfaces and capabilities necessary to maintain and aggregate custodial records and reporting for clients invested across various investment platforms. CLS has entered into an arrangement with CTC to waive the annual custodial fee for CLS clients and all other custodial fees are set forth in the CTC custodial agreement. Trades for client accounts custodied at CTC are affected via the National Securities Clearing Corporation through an arrangement with Matrix Settlement and Clearance Services L.L.C. ("Matrix"). Some of the mutual funds held by CLS clients with assets custodied at CTC may pay shareholder servicing and/or 12b-1 fees to CTC, Matrix and/or our affiliated broker/dealer, Aquarius Fund Distributors, LLC, for distribution and/or shareholder servicing related assistance associated with making a client's investments in such funds. PART 11, Page 5 ITEMS 913, PARTICIPATION OR INTEREST IN CLIENT TRANSACTIONS. 9D, & 9E The principal executive officers and other employees of CLS, as licensed registered representatives of a broker/dealer, are able to effect securities transactions for separate and typical compensation. Those licensed individuals may recommend their broker/dealer to our advisory clients; however, clients are under no obligation to effect transactions through any recommended broker or dealer. We advise you, the client, that you are not under any obligation to engage these individuals when considering implementation of any advisory recommendations made by us. Where possible, CLS will recommend no-load mutual funds or load mutual funds available at Net Asset Value ("NAV"). We may recommend Affiliated Funds and Sub-Advised Funds to clients. Clients are advised of the possible use of Affiliated Funds and/or Sub-Advised Funds in their agreement with us and in the applicable investment management service descriptions, and have the right, at any time, to prohibit us from investing any of their managed assets in Affiliated Funds or Sub- Advised Funds. CLS and its employees may buy or sell securities identical to those recommended to our clients. It is our express policy that any person employed by us is prohibited from profiting at the expense of our clients and from competing with our clients. Code of Ethics CLS has adopted a joint code of ethics along with its parent holding company, NorthStar Financial Services Group, LLC and Aquarius Fund Distributors, LLC, the distributor for the Affiliated Funds (the "Code") in compliance with Rule 17j-1 under the Investment Company Act of 1940 and with Rule 204A-1 of the Investment Advisers Act of 1940. The Code establishes standards and procedures for the detection and prevention of activities by which persons having knowledge of the investments and investment intentions of the AdvisorOne Funds or CLS and to deal with other types of conflict of interest situations to which the Rule 17j-1 and Rule Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 21 Cc~ Coovriaht 2007. National Reaulatorv Services. All Riahts ReserXed. ^ Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801.57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item 1 A of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) 204A-1 are addressed. In summary, the Code prohibits employees of CLS from taking inappropriate advantage of their positions and the access to information concerning the investments or investment intentions of CLS for its clients, or their ability to influence such investment intentions, for personal gain or in a manner detrimental to the interests of its clients. Rule 17j-1 and Rule 204A-1 make it unlawful for CLS employees to engage in conduct which is deceitful, fraudulent, or manipulative, or which involve false or misleading statements, in connection with the purchase or sale of securities. The Code acknowledges the general principles that CLS and/or its employees: (1) owe a fiduciary obligation to its clients; (2) have the duty at all times to place the interests of their clients first (3) must conduct all personal securities transactions in such a manner as to avoid any actual or potential conflict of interest or abuse of an individual's position of trust and responsibility; (4) should not take inappropriate advantage of their positions in relation to client accounts; (5) must comply with the Federal Securities Laws; and (6) must safeguard nonpublic information. A copy of the CLS Code of Ethics is available upon request. Procedures and Disclosures The code of ethics and other procedures adopted by CLS contain the following provisions to handle conflicts of interest: 1) We maintain records of all securities holdings for our clients, our self, our employees and anyone associated with our advisory practice. These holdings are reviewed on a regular basis by our compliance personnel. 2) No individual shall cause or attempt to cause any of our clients to purchase, sell or hold any interest in a security in a manner calculated to create any personal benefit or benefit any employee account. No officer or employee of CLS shall buy or sell securities for their personal portfolio(s) where their decision is substantially derived, in whole or in part, by reason of his or her employment unless the information is also available to the investing public upon reasonable inquiry. 3) Each employee of CLS submits quarterly reports and acknowledges the firm's policies and procedures with respect to its code of ethics on an annual basis. 4) Each employee's personal trading accounts are reviewed on a regular basis by compliance personnel. 5) Any employee not in observance of the above may be subject to disciplinary action, and possible termination. 6) Clients are advised in their agreements with us and in the applicable investment service descriptions of the possible use of Affiliated Funds and/or Sub-Advised Funds in which we have a financial interest. Clients may at any time, instruct us not to use Affiliated Funds or Sub-Advised Funds in their accounts. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 22 Cc~ Convriaht 2007. National Reaulatorv Services. All Riahts Reserved. 05 a3) Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for norm Ally Fart l or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) Error Committee CLS has established an error committee led by the Chief Compliance Officer that meets weekly to review reported errors. The error committee will consider (i) the nature and cause of the error, (ii) whether the client has been disadvantaged by the error, and (iii) suitability of the allocations resulting from an error. CLS will notify its clients of errors caused by CLS that resulted in a loss. CLS will offset any losses against gains resulting from the same error and generally, CLS will credit the clients next advisory fee invoice for the amount of the loss determined by the error committee to be CLS' responsibility. In cases where CLS determines it is not appropriate to credit advisory fees, CLS may issue a check for the amount of the loss to be deposited into the client's account, or under some circumstances a check may be sent directly to the client. PART II, Page 5 ITEM 10 CONDITIONS FOR MANAGING ACCOUNTS. We require minimum account balances as indicated under the services described in Schedule F, under Item 1A. These stated minimums are negotiable on a discretionary basis by us. PART II, Page 5 ITEM I IA REVIEW OF ACCOUNTS. A designated portfolio manager and a new account specialist review information submitted by each new prospective client prior to initial trading, for the appropriateness and suitability of our recommendations. The Chief Investment Officer and the portfolio managers monitor the account positions for asset performance and analyze market risk factors on a daily basis. The relative strength, momentum and price movement of each asset class is reviewed and client allocations are weighted to best meet individual risk tolerances and objectives based on the client's selected investment service. During the daily analysis of economic indicators, should it determine major allocation movements may be necessary, the investment committee, (which consists of the Chief Executive Officer, Chief Investment Officer, Chief Investment Strategist and portfolio managers) will be consulted to review recommendations for approval. The Chief Investment Officer is responsible for monitoring the investment company allocations on a daily basis. At least annually, individual clients are asked to meet with their financial representative. Together, the client and the representative determine whether a change in their objectives warrants a change in the criteria used to manage their assets. At least annually, we send each client his or her confidential client information that describes the client's current personal and investment information. We use this information as the primary reference for managing a client's account. If the information is current, no further action is required. If any information has changed, the client is instructed to advise us of the changes immediately. For all investment services, factors that may affect portfolio weightings include changes in relative strength of the assets, economic changes, changes in client asset levels, or changes indicated by trend analysis as determined by the Chief Investment Officer and portfolio managers. PART II, Page 5 ITEM 11B REGULAR REPORTS. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 23 (c~ Coovriaht 2007. National Reaulatorv Services. All Riahts Reserrvg . 10 -L.D 0-? 3a Schedule F of Applicant: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC Part II 01- 57265 103/31/2007 (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item 1 A of Form ADV: CLS Investment Firm, LLC S Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) Client Quarterly Performance Evaluations (Statements): Your custodian will provide you a statement (at least quarterly) identifying the amount of funds and of each security in your account at the end of the reporting period and setting forth all transactions in your account during the reporting period. CLS also makes various reports and quarterly performance evaluations accessible to its clients via secure internet access. Upon your request, CLS may also provide you with a mailed copy of your quarterly statements and reports. Trade Confirmations: Individual trade confirmations and reports of account activity may be provided by the custodian. CLS will generally communicate with its clients via letters, market up-dates and other CLS generated literature. Under circumstances where the client has expressly consented, client correspondence and notifications may be sent via electronic means (such as e-mail), or posted to a secure web site for client access. Investment Company Clients: The boards of trustees of investment company clients are provided quarterly sales, investment and performance reports as requested. PART II, Page 6 ITEMS 12 INVESTMENT OR BROKERAGE DISCRETION. (1), 12A(2) & 12A(3) In order for us to actively manage your assets, we require that you provide us with discretionary trading authority. This will allow us to buy or sell securities, as well as specify the amount of securities to invest, without first obtaining your specific consent. This authority is limited to the transfer or exchange of your funds between asset classes within mutual fund families, variable insurance product sub-accounts, exchange traded funds, and/or other securities agreed to by you in accordance with the investment management service selected by you. For assets held by a designated custodian, our discretion extends to the transfer or exchange from one fund family to another so long as it is done at net asset value "NAV" and no commissions are generated; however, such exchanges may be performed by a broker/dealer engaged by us. You are responsible for any transaction costs associated with the management of your assets unless otherwise agreed to by CLS as part of a wrap program. In cases where we determine the broker or dealer to be used, we will seek to obtain the best execution possible under the circumstances. This discretionary authority in no way restricts you, from establishing special limitations on the types of investments we may recommend or make on your behalf. You may send us specific written instruction at any time regarding securities you may wish to purchase or sell and you may instruct us not to purchase specific securities or types of securities. If we are unable to accommodate your request for any reason, we will notify you immediately. Upon termination of our investment management services, we will have no obligation or authority to recommend or take any action with regard to the previously managed assets. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 24 Cc) Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. oos a Schedule F of Applicant: SitU Vile Number: ate: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC 801- 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item IA of Form ADV: CLS Investment Firm, LLC RS Empl. Ident. No.: 32-0070947 Item of Form Answer (identify) PART II, Page 6 ITEM 12B INVESTMENT OR BROKERAGE DISCRETION. Some of our employees are licensed registered representatives of a broker-dealer, including our affiliated broker-dealer, Aquarius Fund Distributors, LLC. Those licensed individuals may recommend this broker/dealer to our advisory clients. However, clients are under no obligation to effect transactions through any recommended broker or dealer. We may establish accounts with various nonaffiliated third party broker-dealers. We will only establish accounts that provide the timely service and a fair price. We will attempt to find the lowest cost where possible. Establishment of an account with a third party broker dealer will not increase the advisory fees payable by you. You will be responsible for any fees and/or expenses, including transaction costs, for the establishment and use of your account. Clients directing us to manage assets with a specific broker-dealer, including broker-dealers that have been pre-approved by us, have the sole responsibility for negotiating commission rates and other transaction costs with the broker-dealer. If a client selects a specific broker, we will not be required to effect any transaction through the specified broker if we reasonably believe that to do so may result in a breach of our fiduciary duties. You are advised that by instructing us to execute all transactions on behalf of your account through the specified broker, a disparity may exist between the commissions borne by your account and the commissions borne by our other clients that do not direct us to use a specified broker. You may also not necessarily obtain commission rates and execution as favorable as those that would be obtained if we were able to place transactions with other broker-dealers. You also may forego benefits that we may be able to obtain for our clients through negotiating volume discounts or block trades. Some brokerage firms may make other products and services available that benefit CLS but may not directly benefit its clients' accounts. Some of these other products and services assist CLS in managing and administering client accounts. These may include software and other technology that provide access to client account data (such as trade confirmations and account statements); facilitate trade execution (and allocation of aggregated trade orders for multiple client accounts); provide research, pricing information and other market data; facilitate payment of advisory fees from clients' accounts; and assist with back-office functions, record keeping and reporting. Some of these services generally may be used to service all or a substantial number of CLS' accounts, including accounts not maintained at the brokerage firm providing the service. In addition, some brokerage firms provide CLS access to their institutional trading and custody services which are typically not available to retail investors. Such services may be available contingent upon CLS maintaining certain client asset levels. PART 11, Page 6 ITEM 13A ADDITIONAL COMPENSATION. Certain mutual funds and variable annuities in which you may be invested may pay marketing fees, service fees, including shareholder service fees, 12b-1 fees, or bonus commissions to us or Aquarius Fund Distributors, LLC, our affiliated broker-dealer or to Constellation Trust Company, our affiliated trust company, for marketing assistance or the performance of certain administrative tasks associated with making an investment in such fund or annuity. Any such Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 25 CC) Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. 10,E ~23.3 - Schedule F of Applicant: SEC File Number: Date: Form ADV Continuation Sheet for Form ADV CLS Investment Firm, LLC gpl_ 57265 03/31/2007 Part II (Do not use this Schedule as a continuation sheet for Form ADV Part I or any other schedules.) 1. Full name of applicant exactly as stated in Item 1 A of Form ADV: CLS Investment Firm, LLC 1 RS Empl. Ident. No.: 1 32-0070947 Item of Form Answer (identify) fees received by us will not be credited against the fees otherwise payable by you to us. Our employees or associated persons may also be invited to attend seminars and meetings with the costs associated with such meetings borne by a sponsoring brokerage firm or other party extending the invitation. Some of our employees, who are also registered representatives of a broker/dealer, may receive, from time to time, 12b-1 distribution fees from mutual funds in which they have placed clients' funds. PART II, Page 6 ITEM 13B We enter into marketing arrangements with broker-dealer firms pursuant to which representatives of their firms ("Solicitors") offer our services to the public. These Solicitors refer us the majority of our clients. Through these arrangements, we may pay a cash referral fee to the Solicitor and/or their firm based upon a percentage of our advisory fee. The amount of the referral fee may vary depending on the CLS service selected and the custodial platform utilized. Because accounts maintained with certain custodians are more efficient for CLS to manage, CLS may offer increased referral fee payouts for client assets maintained with these custodians, including client assets maintained with Constellation Trust Company, an affiliate of CLS. Under each of the investment services offered by CLS, the amount of the referral fee CLS pays to the Solicitor may be up to 100% of the amount of the advisory fee CLS receives from you. In connection with these arrangements, we will comply with Rule 206(4)-3 under the Advisers Act. The referral fee is paid pursuant to a written agreement, which is retained by both your representative and us. This information is disclosed to you prior to or at the time of entering into an investment advisory agreement with us. We also may offer these firms and Solicitors reimbursement of certain expenses approved by us. We may pay a portion of the advisory fee to other affiliated or non-affiliated parties who assist with certain administrative tasks associated with the management of your account. Such tasks may include account maintenance, data reconciliation, statement printing, investment research, sub-advisory services or other administrative tasks. We may reimburse unaffiliated third parties for the costs of attending training seminars for the purpose of learning about our advisory business. We also may pay for costs associated with client seminars done for the purpose of acquiring or retaining clients for us. We may pay territorial/regional wholesaler compensation based in whole or in part on revenues generated from a wholesaler's territory or region. Such compensation is separately negotiated and is not based on individual clients. Complete amended pages in full, circle amended items and file with execution page (page 1). PAGE 26 Cc) Coovriaht 2007. National Reaulatorv Services. All Riahts Reserved. 934 ) OS Schedule G of Applicant: SEC File Number: Date: Form ADV Balance Sheet CLS Investment Firm, LLC 801- 57265 03/31/2007 (Answers for Form ADV Part II Item 14.) 1. Full name of applicant exactly as stated in Item I A of Part I of Form ADV: IRS Empl. Ident. No.: CLS Investment Firm, LLC 32-0070947 Instructions I. The balance sheet must be: A. Prepared in accordance with generally accepted accounting principles B. Audited by an independent public accountant C. Accompanied by a note stating the principles used to prepare it, the basis of included securities, and any other explanations required for clarity. 2. Securities included at cost should show their market or fair value parenthetically. 3. Qualification and any accompanying independent accountant's report must conform to Article 2 of Regulation S-X (17 CFR 210.2-01 et. seq.). 4. Sole proprietor investment advisers: A. Must show investment advisory business assets and liabilities separate from other business and personal assets and liabilities. B. May aggregate other business and personal assets and liabilities unless there is an asset deficiency in the total financial position. Complete amended pages in full, circle amended items and file with execution page (page 1). 105 235 CLS INVESTMENT FIRM, LLC (A Wholly-Owned Subsidiary of NorthStar Financial Services Group, LLC) Financial Statements December 31, 2006 Together with Independent Auditor's Report 105 a34e CLS INVESTMENT FIRM, LLC (A Wholly-Owned Subsidiary of NorthStar Financial Services Group, LLC) Table of Contents December 31, 2006 Independent Auditor's Report Financial Statements: Balance Sheet December 31, 2006 Page No. 2 Statement of Income and Changes in Member's Equity For the Year ended December 31, 2006 3 Statement of Cash Flows For the Year ended December 31, 2006 4 Notes to Financial Statements December 31, 2006 5-10 ic~5 a37 S E I M S & SQLfllulTAIST,K JOHNSON LLP CONSULTANTS S & ACCOUNTANTS 8807 INDIAN HILLS DR. Suite 300 OMAHA, NEBRASKA 68114-4123 TEL: (402) 330.2660 FAX: (402) 330.5108 mail@sjsq.com www.sjsq.com Harvey D. Johnson, CPA Wendell L. Quist, CPA Clifford C. Huntington, CPA Roger E. Howard, CPA Roger E. Thompson, CPA Toni H. Schnack, CPA Daniel L. Hassel, CPA Dennis K. Grindle, CPA Dennis If. Hein, CPA Brent T. Friehauf, CPA Barbara J. Fajen, CPA Brian D. Green, CPA Marty Dubas, CPA Jerry O'Doherty, CPA Independent Auditor's Report To the Board of Managers CLS Investment Firm, LLC Omaha, Nebraska: We have audited the accompanying balance sheet of CLS INVESTMENT FIRM, LLC (a wholly-owned subsidiary of NorthStar Financial Services Group, LLC) as of December 31, 2006, and the related statements of income and changes in member's equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 2006 financial statements referred to above present fairly, in all material respects, the financial position of CLS Investment Firm, LLC as of December 31, 2006, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Omaha, Nebraska, March 23, 2007. -1- las a3S CLS INVESTMENT FIRM, LLC (A Wholly-Owned Subsidiary of NorthStar Financial Services Group, LLC) Balance Sheet December 31, 2006 ASSETS 2006 Current assets: Cash and cash equivalents $ 205,339 Receivables: Trade 2,883,080 Due from affiliate 3,777,250 Prepaid advisory fees expense 572,330 Other current assets 85.480 Total current assets 7,523,479 Due from affiliate 2,500,000 Property and equipment, net 381,556 Goodwill 794.395 Total assets $ 11.199.430 LIABILITIES AND MEMBER'S EQUITY Current liabilities: Capital lease obligations $ 36,413 Current portion of long-term debt 16,645 Accounts payable 1,761,494 Due to affiliate 687,672 Advisory fees payable 1,881,524 Unearned advisory fee revenue 878,041 Other current liabilities 442.742 Total current liabilities 5.704.531 Commitments and contingencies Member's equity 5.494.899 Total liabilities and member's equity $ 11.199.430 See notes to financial statements -2- los a37 CLS INVESTMENT FIRM, LLC (A Wholly-Owned Subsidiary of NorthStar Financial Services Group, LLC) Statement of Income and Changes in Member's Equity For the Year Ended December 31, 2006 2006 REVENUES: Investment advisory fees $ 39,309,514 Investment management fees 7,455,900 Other income 2,044,253 Solicitor payments (29,192,713) Advisory fee refunds (489,321) Custodian expenses (417,994) Other fees (2.771.200) Net revenues 15.938.439 OPERATING EXPENSES: Employee compensation and benefits 4,917,069 General and administrative expenses 6,482,797 Management fees 669.163 Total operating expenses 12.069.029 Operating income 3,869,410 OTHER EXPENSES: Interest (12.5281 Net income 3,856,882 Member's equity, beginning of year 4,938,017 Distribution to parent (3.300.0001 Member's equity, end of year $ 5.494.899 See notes to financial statements -3- 1~s aqo CLS INVESTMENT FIRM, LLC (A Wholly-Owned Subsidiary of NorthStar Financial Services Group, LLC) Statement of Cash Flows For the Year Ended December 31, 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities : Depreciation and amortization Increase (decrease) in current assets Receivables: Trade Other Prepaid advisory fees expense Other current assets Increase (decrease) in current liabilities Accounts payable Advisory fees payable Unearned advisory fee revenue Other current liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment Change in amounts due from affiliates Change in amounts due to affiliates Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt Payments on capital lease obligations Distribution to parent Net cash used in financing activities NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR CASH AND CASH EQUIVALENTS - END OF YEAR SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash paid for interest See notes to financial statements -4- 2006 $ 3,856,882 127,189 (752,424) 14,053 202,486 87,343 737,708 495,178 (268,461) 95.956 (77,263) 1,584,578 (2.987.613) (91,710) (48,364) (,3,300,0001 (324,462) $ 205.339 $ 13.375 105 c q I CLS INVESTMENT FIRM, LLC (A Wholly-Owned Subsidiary of NorthStar Financial Services Group, LLC) Notes to Financial Statements December 31, 2006 (1) Organization and Summary of Significant Accounting Policies CLS Investment Firm, LLC (the Company) is an Omaha, Nebraska based registered investment advisor providing investment advice and portfolio management services to individuals, corporations and retirement plans through a network of independent representatives. The Company derives substantially all of its revenue from fee-based asset management support arrangements for clients of its solicitors. The Company's clients are located throughout the United States. The Company is a wholly-owned subsidiary of NorthStar Financial Services Group, LLC (NorthStar or Parent). Accordingly, the accompanying financial statements have been prepared to present the financial position and results of operations of the Company only and are not intended to, and do not, present the financial position and results of operations of NorthStar as of any date or for any period. Significant accounting policies are as follows: A. Basis of Accounting The Company maintains its accounting records and prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. B. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. C. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers cash and all highly liquid debt instruments with maturities of less than three months from the date of purchase to be cash equivalents. D. Trade Receivables The Company evaluates the collectibility of receivables at the end of the fiscal year and establishes an allowance for bad debts for all accounts or portions thereof considered uncollectible. No allowance was recorded against trade receivables at December 31, 2006. -5- / 6,S_ I c Notes Continued E. Fixed Assets Property and equipment are recorded at cost. Depreciation and amortization are computed using straight-line and accelerated methods over the following ranges of estimated useful lives: Computer equipment 3 - 7 Years Telephone equipment 5 Years Furniture and fixtures 5 - 7 Years Leasehold improvements 7 - 39 Years Equipment under capital leases 5 - 10 Years F. Goodwill In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, goodwill is no longer amortized but, instead, is assessed for impairment at least annually. Any excess of carrying value over fair value is recognized as an impairment loss in continuing operations. During this assessment, management relies on a number of factors, including operating results, business plans, and anticipated future cash flows. G. Income Taxes The Company, as a wholly-owned subsidiary of NorthStar, is a disregarded entity for income tax purposes under the provisions of the Internal Revenue Code. Accordingly, income from the Company is reported and respective income taxes are paid by the members of the Parent and, as a result, no provision for federal income taxes is provided as it relates to the LLC taxable income. A provision for federal income taxes is provided for other federal income taxes payable by the Company, when applicable, due to its previous form of organization as a Nebraska corporation. Also, no provision has been made for any amounts which may be advanced or paid as draws to the members of the Parent to assist them in paying taxes on the Company's income. H. Revenue Recognition Fee income from investment advisory and asset management services is recognized ratably on a straight-line basis over the contract period. Customers are billed an advisory fee computed as a percentage of assets under management. Advisory fees billed in advance are recorded as unearned revenue and are amortized ratably on a straight-line basis into income over the remaining unexpired contract term. Advisory fee expense is recognized ratably over the same period as the related revenues from investment advisory services. Advisory fee expense related to revenues not yet earned is deferred and amortized ratably on a straight-line method over the unexpired term of the related contract for advisory services. Brokerage commission income and expense are recorded on a trade-date basis. -6- 105 a 11 3 Notes Continued Advertising The Company expenses its advertising costs as incurred the first time the advertising takes place. (2) Fixed Assets Fixed assets consist of the following at December 31, 2006: 2006 (3) Computer equipment $ 592,783 Telephone equipment 14,328 Furniture and fixtures 305,659 Leasehold improvements 194,664 Equipment under capital leases 627,756 1,735,190 Less accumulated depreciation and amortization (1,353,634) $ 381,556 Depreciation and amortization expense of $127,189 in 2006 is included in the accompanying statement of income and changes in member's equity under the caption of general and administrative expenses. Accumulated depreciation of fixed assets under capital leases was $512,774 as of December 31, 2006. Goodwill Goodwill was tested for impairment at the reporting unit level and must be tested annually thereafter utilizing a two-step methodology. The initial step requires the Company to determine the fair value of each reporting unit. If the fair value exceeds the carrying value, no impairment is to be recognized. However, if the carrying value of the reporting unit exceeds its fair value, the goodwill of this unit may be impaired. The amount of the impairment, if any, is then measured in the second step. In connection with NorthStar's purchase of the Company, effective January 1, 2003, all previously existing goodwill of the acquired companies was eliminated. At that time, NorthStar determined the carrying value of its assets and liabilities was less than the fair market value and the final allocation of the purchase price resulted in the Company recording goodwill in the amount of $794,395. The Company updated its annual impairment testing of goodwill as of December 31, 2006 and determined no loss was required to be recognized in 2006. The fair value update was based on the present value of the Company's expected future earnings. -7- )DD a4 Notes Continued (4) Long-Term Debt Obligations At December 31, 2006, long-term debt obligations consisted of the following: Note payable to a former shareholder, at effective rate of 6.43%, with an initial payment of $27,893, payable in quarterly installments of $25,000 through December 1, 2006 and final payment of $17,107, including interest, on March 1, 2007, guaranteed by NorthStar. Less current maturities Net long-term debt Maturities of long-term debt obligations are as follows: 2006 $ 16,645 (16,645) Years Ending December 31, Amount 2007 $ 16,645 (5) Capital Lease Commitments Capital lease obligations at December 31, 2006 consist of furniture, fixtures and equipment leased by the Company. The following is a schedule by years of future minimum lease payments under capital leases, together with the present value of the minimum lease payments as of December 31, 2006: 2007 $ 37,475 Total minimum lease payments 37,475 Less amount representing interest (1,062) Present value of net minimum payments 36,413 Less current portion of capital lease obligations (36,413) Capital lease obligations, net of current portion $ Amortization expense of $28,419 for the year ended December 31, 2006 is included in the accompanying statement of income and changes in member's equity and is included in total depreciation and amortization expense of $127,189 in 2006 (see Note 2). -8- j ) Notes Continued (6) Commitments and Contingencies The Company has several noncancelable operating leases for office equipment. Future minimum payments under these leases are approximately as follows: 2007 $ 32,108 2008 2,594 $ 34,702 The total rental expense included in the statement of income and changes in member's equity under these leases for the year ended December 31, 2006 was $35,088. The Company has entered into an agreement with Schield Management Company (Schield), an investment advisor. Beginning with the quarterly period ending March 31, 2005 and ending with the quarterly period ending December 31, 2013, the terms of the agreement provide for forty quarterly payments of $125,000 to be adjusted upward or downward based on the aggregate value of assets under Company management that transferred from Schield pursuant to the agreement. Due to the contingent nature of the purchase payments owed to Schield, any payments made to Schield by the Company will be expensed in the period in which they are paid. During 2006, payments of $429,258 were made to Schield. These are included in the accompanying statement of income and changes in member's equity under the caption of solicitor payments. The Company, along with NorthStar, Orion Advisor Services, LLC (Orion) (a wholly-owned subsidiary of NorthStar) and Gemini Fund Services, LLC (Gemini) (a wholly-owned subsidiary of NorthStar which includes Gemcom, LLC and Fund Compliance Services, LLC, both are wholly-owned subsidiaries of Gemini), are named borrowers on a $2,000,000 line of credit, which is collateralized by assets of all the companies. The outstanding balance of $1,287,368 at December 31, 2006 is recorded on NorthStar's financial statements. The amount allocated to the Company is netted in the receivable from NorthStar. See Note 7. Effective January 1, 2003, the Company was purchased by NorthStar. The Company's previous owner did not provide either the Company or NorthStar with sufficient evidential matter regarding tax elections or whether there were any unsatisfied tax obligations prior to the date of purchase. The terms of the purchase agreement indemnify the Company and NorthStar for tax claims and liabilities for all taxable periods ending on or before December 31, 2002. (7) Related Party Transactions NorthStar assesses each of its subsidiaries that subsidiary's ratable share of certain overhead and payroll expenses. The total amount of these overhead and payroll expenses allocated to the Company during 2006 of $669,163 is included in the accompanying statement of income and changes in member's equity under the caption of management fees. The Company also has advanced monies to NorthStar and paid certain expenses of NorthStar which are to be reimbursed. -9- )os aq(~ Notes Continued The Parent's two members own 99.9% of the shares outstanding of Constellation Trust Company (Constellation). The Company entered into a service agreement with Constellation, whereby Constellation will provide custody-related services for the Company's clients. Total service fees incurred from Constellation were $518,053 and are included in the accompanying statement of income and changes in members' equity under the caption of custodian expenses. The Company had a payable and an accrued liability in the amount of $151,572 and $87,353, respectively, to Constellation at December 31, 2006 included in the accompanying balance sheet under the captions of accounts payable and other current liabilities, respectively. The Company pays Orion for operational support services. Total fees paid to Orion during 2006 of $4,481,972 are included in the accompanying statement of income and changes in members' equity under the caption of general and administrative expenses. The Company provides investment advisor services for certain accounts for which Aquarius Fund Distributors, LLC (Aquarius) (a wholly-owned subsidiary of NorthStar) receives marketing and shareholder servicing fees. In the ordinary course of business, Aquarius may advance funds to the Company. In the ordinary course of business, the Company may receive funds from Gemini in order to meet working capital requirements. Receivables, net, from related parties at December 31, 2006 are as follows: 2006 NorthStar: Current portion $ 3,777,250 Long-term portion 2,500,000 $ 6,277,250 Payables, net, to related parties at December 31, 2006 are as follows: 2006 Aquarius $ 687,672 (8) Employee Benefit Plans NorthStar sponsors a 401(k) defined contribution plan to assist the Company's eligible employees in providing for retirement or other future financial needs. Participants may contribute up to 15% of their salary, subject to certain limitations. NorthStar contributes an amount determined annually by the Board of Managers. For the year ended December 31, 2006, contributions to the plan were in the amount of $39,985. -10- 105 04.7 S E I M JOHNSON S LLP S Q2USTAIST,K & CONSULTANTS S & ACCOUNTANTS 8807 INDIAN HILLS DR. Suite 300 OMAHA. NEBRASKA 68114-4123 TEL: (402) 330.2660 FAX: (402) 330.5108 mail@sjsq.com www,sjsq.com Harvey D. Johnson, CPA Wendell L. Quist, CPA Clifford C. Huntington, CPA Roger E. Howard, CPA Roger E. Thompson, CPA Tom H. Schnack, CPA Daniel L. Hassel, CPA Dennis K. Grindle, CPA Dennis R. Hein, CPA Brent T. Friehauf, CPA Barbara J. Fajen, CPA Brian D. Green, CPA Marty Dubas, CPA Jerry O'Doherty, CPA CONSENT OF INDEPENDENT AUDITORS We agree to the inclusion in this Uniform Application for Investment Adviser Registration of our report dated March 23, 2007 on our audit of the financial statements of CLS Investment Firm, LLC (a Wholly-Owned Subsidiary of NorthStar Financial Services Group, LLC). We also consent to the reference of our firm under the caption "Independent .Auditors." SEIM, JOHNSON, SESTAK & QUIST, LLP Certified Public Accountants By: ► ,,14. - Dennis R. Hein March 26, 2007 lo5 dYS ~:Z-~.~ih':~1 ,fii~f~'~1III:~i~•l1'•~']]~'~:5► • • "t • mar. • • Jan 11 2008 11:25RM HP LRSERJET FAX 979-361-4293 RENEWAL ACCEPTANCE By signing herewith, I acknowledge and agree to renew Bid 2007- 007, Seal Coat Projects for Pcts. 1,2,3 & 4, in accordance with all terms and conditions previously agreed to and accepted. The new bid number will be Bid 2008-020 with a 6.1% increase on roads with HFRS-2 at.40 gal per sq yd and an increase of 7.15% on roads with HFRS-2 at.42 gal per sq yd. I understand this agreement will be in effect upon approval by Commissioner's Court. F.N. PLOCH CONSTRUCTION COMPANY, INC. Authorized Signature Date Date 105 01l p.3 BRAZOS COUNTY yr C) X 1 L'T r C7 1- M 1` Q C N N N N N N N N M Cd M Cv 0 49 44 44 44 4D- 49 44 1, W r N U feA iA Z ~ _ y O tt7 C3 U = o n 0 0 O to 0 0 Cl) ( O o - `V et cs c CL 3 r r Lc) r r- r LO r r- r LCJ r r ~ c r r l 1 w r m ? CO r r r r r r 117 co t 1 w w c . = Z O c N ~ .4 H r ~ w a Q 0 1-- CV ;C 1- o U K J C CL Z m o~ t Q of °o U I* ti 4 ti le ti ~ ti ti Con O m i ~ c z N ' N N N N N N N N p a a O r 4s r 44 44 4~► r 44 r 40-b- 4► V- M O O N z a I"- D V Q c d C ~ w na ~ F 0 O V I A N N r- to 1- C%4 O p O CO p 0) r 4 fin N r N ti N r aM- co W LII N C E O ` a co z O Q3 L^ ~ Q uj c3r C2 cm C3, cm cm O 3 0 0 0 0 0 0 0 0 J Q W a o V O' o a a Q z CO) F- N th ' a O U O a a IL a U J 105 asZ) Document Efficiency At Work." STATE AND LOCAL GOVERNMENT IMAGE MANAGEMENTAMAGE MANAGEMENT PLUS AMENDMENT THIS AMENDMENT ("Amendment") is dated as of the .29 day of 2005 to that certain agreement no. [Insert customer no. first, then insert agreement/schedule no.] ("Agre ment") between IKON Office Solutions, Inc. ("we" or us") and , as customer ("Customer" or "you"). All capitalized words used but not defined in this Amendment will have the meanin s given to them in the Agreement. Except to the extent modified by this Amendment, the terms and conditions of the Agreement will remain unchanged and shall continue in full force and effect. Customer Information: Customer Name: 0V`Q-,05 , Address: © /Z l R 51- 5 1 3 l ~1 City: ya, County: &47J25 State: TIC Zip: rj? ~'o3 Term of Amended Agreement: This Amendment extends the current term of the Agreement as follows: As of the date of our acceptance of this Amendment, as indicated by our signature below, the current term of the Agreement is extended for q7 months ("Extension Period") from the current expiration date. Billing for the amended amount will begin on the first payment date after the date of our acceptance of this Amendment and will be further adjusted, in each case as specified in the table below, on the first payment date following commencement of the Extension Period. Equipment added pursuant to this Amendment will be subject to the terms and conditions of the Agreement, as amended by this Amendment. Equipment Change: Equipment Change Quantity Add Delete ❑ Image Volume Change Make/Mnriel ❑ Both Rv KA,. f s ~ 3 Fl-l, penal 4 ~7 yJ Amended Billing: Cost per Image From To At Comme Extension Guaranteed Minimum Monthly Images Cost of Additional lm M' 5 D, c©o ~'lo>ti~~~~ a es , 00(0,2 n mum Monthl Payment C~gS , c~.~ rp~ coo vvt n~}kly , o o 11 0 0 v ncement of the Period *Upgrade Option: At any time during, but in no event prior to, the Extension Period, upon satisfaction of the conditions below, we will permit you to replace on the terms set forth below any of the Equipment originally provided under the Agreement ("Original Equipment") with items of equipment supplied by IKON Office Solutions, Inc. ("IKON') of like or greater value and with additional features or enhanced technology ("Upgrade Equipment"). You will be eligible for the upgrade option described above only if (i) at the time of the effectiveness of your upgrade transaction you are not in default and satisfy reasonable prior credit review, and (ii) in connection with such upgrade transaction you enter into a new mutually satisfactory amendment (or comparable agreement) with a term at least equal to the original term under the Agreement (without giving effect to this Amendment) setting forth the specific terms and conditions relating to such Upgrade Equipment. You will not be eligible for such an upgrade option prior to the Extension Period. Upon the effectiveness of such an upgrade transaction, we will waive, for the remainder of the Extension Period, all payments which are not yet due and payable and which relate to those items of Original Equipment replaced by the Upgrade Equipment. The upgrade option described above and waiver of payments described above shall not apply to items of Equipment added to the Agreement pursuant to this Amendment. The Image Management Cost-Per-Image, the Cost of Additional Images, and the Minimum Payment under the new amendment (or comparable agreement) will be based on the new equipment requested and your new image volume commitment. IKON Office Solutions, Inc. Rev. 7/04 o5 psi Customer acknowledges and agrees that subject to the upgrade option set forth above, the Agreement, as amended by this Amendment, is UNCONDITIONAL AND NON-CANCELABLE. Authorized Signatures: IKON Office Solutions, Inc. By: ~ Authorized/A gner Date Name & Title/ j C_ By: DV Authorized Signer Name & Title: Date IKON Office Solutions, Inc. 2 Rev. 7/04 105 ~25 01, BRAZOS COUNTY COMMISSIONERS' COURT ACTION FORM DEPARTMENT Road and Bridge NUMBER 560010 DATE OF COURT MEETING: January 2F, 2008 ITEM: Request for proposed installation from Wellborn Special Utility District to place 300ft. of 2" PVC pipe with two bores and within the right-of -way of South Dowling and North Graham Rd. In Brazos County Texas as follows: SOURCE OF FUNDS: N/A REQUIREMENTS: 1. No work will be permitted between front slope and/or back slope. 2. All installation(s) shall be constructed in designated utility easements, if applicable. If no utility easement exists, the installation(s) shall be 1) within 3-5' of and parallel to the right-of- way line and/or 2) in the case of a road bore, perpendicular to the right-of-way line. 3. If clearing of brush, trees and other obstruction is necessary, it shall be the Applicant's responsibility to do so and to remove all cleared brush, trees etc. from county right-of-way. 4. Ditch line shall be compacted to 90% standard density ASTM-Test Method No. D-698; test shall be conducted by an independent geotechnical testing firm; copies of all test results shall be furnished to the office of the Brazos County Engineer. 5. Construction shall be in strict conformance to the latest Texas Manual of Uniform Traffic Control Devices for Streets and Highways, published by the Texas Department of Transportation, and all other State and Federal laws governing utility construction. NOTES/EXCEPTIONS: ACTION REQUESTED OR ALTERNATIVES: S7TT BY: Richard F. Vance, P.E. County Engineer 0006-062 APPROVED BY: zl&-/ 6&t La, #LA*"- l Com sioner Lloyd Wassermann Precinct 1 This Request is~Approved / Denied ❑ by Commissioners' Court Date: Randy Si ounty Judge REQUEST FOR PROPOSED INSTALLATION IN COUNTY RIGHT-OF-WAY TO THE COMMISSIONERS' COURT OF BRAZOS COUNTY, TEXAS BRAZOS COUNTY COURTHOUSE BRYAN, TEXAS 77803 Formal notice is hereby gie f tohaP~applicant) WP_ 116yn I OD proposes to pace a (type)Kwithinv,'_ across the right-of-way of (road) )\ltv & VQ1,0LPo.. in Brazos County, Texas as follows: The location or description of the proposed installation is more fully shown by 3 copies of the drawings attached to this notice. I understand and agree that: 1. The County Engineer must be notified 72 hours prior to the beginning of construction in order that he, or his designated inspector, may inspect the actual installation. 2. All damage to the roadways and rights-of-way will be repaired to their original condition to the satisfaction of the County Engineer. 3. Brazos County reserves the right to require Applicant to relocate or lower any such line at no cost to Brazos County, should same become necessary due to widening or lowering, or other alteration of the roadway or right-of-way. 4. Brazos County will in no way be responsible for any damage which might occur to any existing utility lines in the right-of-way. 5. The line will be constructed and maintained on the County right-of-way in accordance with the Utility Accommodation Policy which was adopted by the Texas Department of Transportation on May 29, 1989. 6. The line or lines will be constructed no less than twenty-four inches (24") lower than the lowest part of the drainage or bar ditch and the drainage is to be considered at least two feet (2') below the center of the roadway. 7. All sites will be barricaded during the construction period. Construction of this line will begin on or after the I% day of 20 09 Firm: W(L" u1n;` ~,),o By:0 { Qfo Title: L~Ulk Address: Phone: Tn (A q: M APPROVED BY COMMISSIONERS' COURT ON; nr t Date 1- I/,;,, 11 Rand 4 y Si ,County Judge ; / 05 a,6 ~ rJ, - d - - TT) ~ S) ~cb a65