Brookhaven Strategies, LLC

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1 Brookhaven Strategies, LLC Survey of Commodity Investment Opportunities Authors: Marc Schwarzschild Martin J. Wolff June 22, 2009 Brookhaven Strategies, LLC 42 West 24th Street Second Floor New York, NY DISCLAIMER: Although Brookhaven Strategies, LLC has attempted to provide accurate information in these materials, Brookhaven Strategies, LLC and the individual authors assume no legal responsibility for the accuracy or completeness of the information. Furthermore, the product information provided herein does not constitute or contain any guarantee, warranty, legally binding representation, or solicitation of any kind.

2 Brookhaven Strategies, LLC 2 Contents 1 Introduction 3 2 Investment Opportunities Physical Commodity Commodity and Currency ETFs and ETNs Mutual Funds Futures Managed Futures Programs (CTA/CPO) Other Asset Classes Analysis Fees Comparative Analysis Growth Charts Correlation Matrix Risk vs. Return Conclusion 12 5 Appendix: Investments and Indexes 12

3 Brookhaven Strategies, LLC 3 1 Introduction Typical diversified portfolios include allocations to stocks, bonds, and real estate. One criterion that professional portfolio managers use when evaluating candidate investments is the performance correlation to other portfolio components. The ideal candidate is one that has a low correlation to the existing portfolio while offering strong performance. Adding this candidate then reduces the overall risk profile of the portfolio by stabilizing the returns over time. Given the contrast between the 2008 losses of stocks, bonds and real estate markets to the attractive uncorrelated returns earned by many commodity products, investors are looking to add commodities to their portfolios. The key question for these investors is how. Brookhaven Strategies, LLC prepared this survey paper for prospective commodity investors. Although this paper is not an exhaustive survey of possible commodity investments, it does cover a number of general investment types and compares some well known products for each. 2 Investment Opportunities Before understanding the range of commodity products available, an investor should be familiar with some basic concepts. The following definitions may be useful to some readers. Commodities are those physical raw materials, and some processed, that have an associated futures contract listed on a regulated exchange. They include metals, oil, gas, grains and other crops, and livestock. Although not physical commodities themselves, a number of currency futures, bond futures, and stock index futures are considered to be in the same asset class as commodities because, like commodities, they are traded as futures contracts on a regulated exchange. Commodities are hard, tradeable goods or products. Therefore, an appropriate investment strategy need not have any directionality, e.g. long or buy only, and would not relate to corporate management risks. Furthermore, because commodity pricing is driven by macro-economic supply and demand relationships, investments can benefit from the short, medium, and long term adjustments in these relationships. Since commodities are directly associated with macro-economic market dynamics, pricing does not relate to business acumen, management, or other market risks associated with running a business that directly impact stock and some bond pricing. There is no association of success or failure to the underlying commodity and investment profits are directly related to the investment strategy. A futures contract is an agreement between a buyer and seller to deliver commodity goods at a future date for a price set in the contract. Futures exchanges, such as the Chicago Mercantile Exchange and other exchange around the world, regulate listed contracts. The main purpose of regulation is to guarantee the delivery and price of the underlying commodity, and to guarantee the quality of the delivered goods. Futures contracts are the most classical and direct method for taking positions in the commodity markets. Exchange Traded Funds (ETFs) were originally conceived to provide a single instrument that tracks the value of a broad market index. They are set up as trusts that invest in a basket of stocks making up the given index tracked. The first ETF, the S&P Deposit Receipt (SPDR), held the components of the S&P 500 Index. A buyer of an ETF holds shares in the trust. ETFs never track actively managed mutual portfolios because their holdings are not exposed quickly enough. It is important to note that ETFs are dumb in that they track a basket of investments regardless of their performance. The ETF investor must still be concerned with risk control issues.

4 Brookhaven Strategies, LLC 4 Some ETFs track commodity futures markets and are attractive because ETF products have become so familiar. The lack of risk control still does require an investment strategy to determine entry and exit points. Exchange Traded Notes are a relatively new alternative to ETFs providing better index tracking. The web site offers the following definition: An ETN is a type of unsecured, unsubordinated debt that was first issued by Barclays Bank PLC. This type of debt security differs from other types of bonds and notes because ETN returns are based upon the performance of a market index minus applicable fees, no period coupon payments are distributed and no principal protections exists. The purpose of ETNs is to create a type of security that combines both the aspects of bonds and exchange traded funds (ETF). Similar to ETFs, ETNs are traded on a major exchange, such as the NYSE during normal trading hours. However, investors can also hold the debt security until maturity. 2.1 Physical Commodity Investors looking to diversify a portfolio with the addition of a commodity component will likely find it cumbersome to take delivery and store physical commodities. Dealers of commodities can make storage arrangements on the buyer s behalf, but the associated fees become part of the carrying costs. Some commodities, precious metals for example, are more straightforward and have classically been a part of wealth preservation planning. However, they require secured storage, vaults, or bank safety deposit boxes. Consequently, typical buyers of the physical commodities are industries that rely directly on the material goods. Incidentally, those suppliers and industrial consumers tend to hedge their physical inventory with futures contracts, the very reason why futures markets exist. 2.2 Commodity and Currency ETFs and ETNs Rather than buying individual physical commodities and then paying for storage or take delivery of the physical commodity, investors can purchase shares of an Exchange Traded Fund (ETF) that tracks physical prices. A well known example is the Vanguard Materials Index Fund (VMIAX). It is also possible to take short positions in ETFs which can be useful when taking the view that the dollar is strengthening with respect to another currency. However, a short ETF position is a short stock position and incurs borrowing costs. Another use for shorting currency ETFs is hedging currency risk for foreign denominated investments though currency futures are a cheaper more traditional method for currency risk protection. The security of an ETN investment is dependent on the solvency of the issuer. If the bank dissolves the ETN becomes worthless, whereas an ETF is backed by the underlying exchange traded securities and its solvency is independent of the administrators. Two ETNs analyzed are: 1. PowerShares DB Commodity Long ETN (DBB) which tracks the Deutsche Bank Liquid Commodity Index; and 2. E-TRACS Constant Maturity Commodity Index ETN (UCI) which tracks the UBS Bloomberg Constant Maturity Commodity Index Total Return. Currency futures provide the ability to benefit from relative changes in the strength of foreign economies. Rydex Investments has a number of currency specific trusts traded as ETFs that track the US dollar exchange rate for each respective currency. In recent years two comprehensive commodity futures indexes were introduced. One started at AIG and became the DJ-AIG Commodity Index, now know as the DJ-UBS Commodity Index (DJUBSCI)

5 Brookhaven Strategies, LLC 5 after being sold to UBS. The other started at Goldman Sachs known now as the S&P Goldman Sachs Commodity Index (GSCI). These indexes track the weighted price of a basket of commodity futures contracts. The ipath Dow Jones-AIG Commodity Index Total Return ETN (DJP) tracks the DJUBSCI. The ishares S&P GSCI Commodity-Indexed Trust (GSG) tracks the GSCI. They are both included in the analysis section shown later in this paper. 2.3 Mutual Funds Several mutual funds indirectly offer investors access to the commodity market through a portfolio of stocks in companies that are materially involved with the business cycle of commodities such as mining or shipping companies. An investor in one of these funds is still exposed to the operational risks of any company as well as the related commodity market. Two examples are the Fidelity Global Commodity Stock Fund (FFGCX), and the Rydex Commodity Strategy fund (RYMJX) which invests in a basket of ETFs. There are some mutual funds such as the Oppenheimer Real Asset Fund (QRACX) and the PIMCo Commodity Real Return Strategy Fund (PCRAX) that try to mimic the GSCI or other commodity indexes. Because this paper includes an analysis of the GSCI directly, these GSCI tracking funds are not discussed further. 2.4 Futures Investors with insight and a particular strategy for selecting commodity markets may purchase futures contracts directly through a Futures Clearing Merchant (FCM). Most large stock brokerage firms can also handle futures transactions. Careful attention must be paid to several parameters of a futures contract including delivery dates and liquidity to be sure positions can be carried forward, or rolled, from one contract to another avoiding possession of the underlying physical commodity. Educational material about futures trading is available on the Internet at well known commodity exchange web sites. A good starting point is the Chicago Mercantile Exchange (cmegroup.com) or the New York Mercantile Exchange (nymex.com). Traditional long term buy and hold strategies, so familiar to many stock market investors, does not work for trading futures contracts because there is no inherent growth in value for commodities. Prices run up because of increased demand and decline because of increased supply. Naturally the inverse supply-demand relationship also exists. Commodity markets tend to be very liquid and efficient so prices quickly reflect the sentiment of all participants. 2.5 Managed Futures Programs (CTA/CPO) Managed futures programs take advantage of price movement in commodity markets through actively traded portfolios of futures contracts. These programs are available from commodity trading advisors or CTAs to investors in either a familiar fund structure or set up as a managed account. When offered as a fund, a CTA s program usually requires an investor to take a membership or partnership investment in the fund. The investor will then receive monthly statements showing the change in value of the account. Liquidity is often provided on a monthly or quarterly basis, although there is quite a bit of variation among various CTAs. In a managed account arrangement, the CTA is given a trading power of attorney to trade an account that is in the investor s name at the investor s brokerage firm. This arrangement provides

6 Brookhaven Strategies, LLC 6 complete transparency and liquidity to the investor, but usually at a much higher minimum investment than for a fund, say $10 million US. To represent investments in CTAs, this paper uses the Barclay Hedge BTop50 Index as a benchmark for CTA performance. This index is based on the aggregated performance of the largest CTAs as measured by assets under management. A more complete description can be found in the Appendix. While individual global markets can experience Black Swan events, CTAs that diversify investments properly and impliment disciplined risk controls can limit their downside. For example, multiple positions in uncorrelated commodity markets can isolate losses to only a portion of the portfolio. Another technique is hedging with simultaneous long and short positions in markets related by a common environmental factor. An example of a multi-market hedged position that could mitigate the impact of a weather related crisis is a long position in wheat coupled with a short position in corn. Disciplined risk controls can be implemented in a variety of ways including stop limit orders and making certain that positions are spread over markets with unrelated price movement. In rare instances, it may still be possible to have all positions in a well diversified, uncorrelated portfolio lose at the same time. If this happens, a CTA with a balanced and disciplined set of positions should still retain sufficient capital in the fund to continue trading and enjoy a timely recovery. A commodity pool may consist of a single manager and provides the legal structure for a commodity trader to operate as a fund. The general partner or manager of the pool is known as the Commodity Pool Operator (CPO). A multiple manager or multi-strategy commodity pool can provide another layer of diversification by allowing the portfolio manager to spread risk across multiple CTAs. Funds that track the BTop50 index offer a simple way to achieve this risk reduction. Other multiple manager products exist that take a more selective and strategic approach to incorporating CTAs into their pool. They are typically private placement investments and can be an attractive solution when seeking portfolio diversification into commodity markets. Multiple manager managed futures products also provide access to a portfolio of programs without having to meet the required aggregate minimums, typically about $1 million US. 2.6 Other Asset Classes This discussion would not be complete without inclusion of some broadly common investment vehicles. Listed below are products representing asset classes other than commodities. These products are analyzed in this study for comparative purposes without any discussion of their relative merits. Note that the S&P 500 Index is represented by the Vanguard 500 Index Fund which closely tracks the index. Vanguard 500 Index Fund (VFINX) Lehman Aggregate Bond Index Loomis Sayles Bond Fund (LSBDX) ishares Dow Jones U.S. Real Estate Index Fund (IYR) ishares S&P World Property ex-us ETF (WPS)

7 Brookhaven Strategies, LLC 7 3 Analysis 3.1 Fees Performance data and statistics used in this document are all net of any fees taken by product managers. However, the following table lists product types and typical fees for comparative purposes. Fee Comparison Table Product Physical Commodity ETF ETN Mutual Fund Futures CTA/CPO Multiple Manager CPO Fees Brokerage commissions vary widely depending on the commodity. Costs are further impacted by country of origin and handling costs. Trustees typically earn under 0.5% per year. Fees typically start at 0.75% per year and vary daily with changes in the NAV. Most ETNs scale the fee by the ratio of the closing price to the NAV of the ETN at its inception. Varies greatly and can include front and back loads. Index funds tend to be load free and charge a low annual fee typically below 0.75%. Trading commissions in the range of $3 to $10 per contract. This is very inexpensive considing the contract size and margin requirements. Similar to typical hedge funds with 2% annual management fee and 20% incentive fee. Incentive fees are a percentage of new profits usually above a highwater mark. Therefore, no incentive fee is taken from losses or until the losses are recovered. Simliar to CTA/CPO but typically with 1% annual management fee and 10% incentive fee.

8 Brookhaven Strategies, LLC Comparative Analysis For most investors considering a new product, the first important performance measure reviewed is its annualized return. However, return alone does not offer a sufficient appraisal of risk. To that end, maximum historical draw down or largest peak to trough return can be used as an important capital risk parameter. The table below lists the annualized returns and maximum draw downs for a number of representative commodity based products and some products based on the other asset classes. The Months column indicates the number of months analyzed. The Ann. Ret. column lists the annualized return over the life of the product. The Max. DD column lists the maximum draw down or largest peak to trough return over the life of the product. Summary Table All Products Name Symbol Months Ann. Ret. Max. DD Barclay BTop50 Index BTop % 13.31% Barclay Global Macro Index BGMI % 4.96% Barclay NewEdge Short-Term Traders Index STTI % 0.42% CurrencyShares Australian Dollar Trust FXA % 4.65% CurrencyShares British Pound Sterling Dollar Trust FXB % 1.57% CurrencyShares Euro Trust FXE % 1.92% CurrencyShares Canadian Dollar Trust FXC % 5.85% CurrencyShares Japanese Yen Trust FXY % 8.57% CurrencyShares Mexican Peso Trust FXM % 2.63% CurrencyShares Russian Ruble Trust XRU % 0.00% CurrencyShares Swedish Krone Trust FXS % 3.36% CurrencyShares Swiss Franc Trust FXF % 3.52% Dow Jones - UBS Commodity Index DJUBSCI % 36.19% E-TRACS Constant Maturity Commodity Index ETN UCI % 0.00% Fidelity Global Commodity Stock Fund FFGCX % 0.00% Ivy Global Natural Resources IGNAX % 27.56% PowerShares DB Commodity Double Long ETN DYY % 0.00% PowerShares DB Commodity Double Short ETN DEE % 19.48% RJ/CRB Commodity Index CRBCI % 6.65% Rydex Commodity Strategy C RYMJX % 30.31% S&P Goldman Sachs Commodity Index GSCI % 55.51% Vanguard Materials Index Fund Admiral Shares VMIAX % 11.94% ipath Dow Jones-AIG Commodity Index Total Return ETN DJP % 6.50% ishares S&P GSCI Commodity-Indexed Trust GSG % 23.05% Non-Commodity Related Products Lehman Global Aggregate Bond LehmanBond % 7.43% Loomis Sayles Bond Fund LSBDX % 8.19% Vanguard 500 Index Fund VFINX % 44.83% ishares Dow Jones U.S. Real Estate Index Fund IYR % 14.92% ishares S&P World Property ex-us ETF WPS % 0.00%

9 Brookhaven Strategies, LLC Growth Charts The following two charts show the growth of $1000 over a five year period ending May Only products where five or more years of historical data are available are charted. Two charts are provided because the number of products are too numerous for a single chart. While all of the products had numerous positive years, the majority also experienced large losses. It is interesting to note that the Vanguard 500 Index Fund (VFINX) experienced one of the largest draw downs. The BTop50 and BGMI stand out as the only commodity based products having steady growth without the matching draw downs. Similarly, the Lehman Aggregate Bond Index, noted as Bond in the key, is the most stable of the non-commodity investments Cumulative Growth of $1000 LSBDX IYR BTop50 BGMI Bond Growth ($) Growth ($) Jul 2004 Oct Jan 2005 Apr 2005 Jul 2005 Oct 2005 Jan 2006 Apr 2006 Jul 2006 Oct 2006 Jan 2007 GSCI IGNAX DJUBSCI CRBCI VMIAX VFINX Cumulative Growth of $1000 Apr 2007 Jul 2007 Oct 2007 Jan 2008 Apr 2008 Jul 2008 Oct 2008 Jan 2009 Apr 2009 Jul 2004 Oct 2004 Jan 2005 Apr 2005 Jul 2005 Oct 2005 Jan 2006 Apr 2006 Jul 2006 Oct 2006 Jan 2007 Apr 2007 Jul 2007 Oct 2007 Jan 2008 Apr 2008 Jul 2008 Oct 2008 Jan 2009 Apr 2009

10 Brookhaven Strategies, LLC Correlation Matrix Although the charts above offer a visual idea of how many of the products seem to follow each other, a tabular correlation analysis can provide a more quantitative perspective. The Symbol Key table lists for what each product may be considered a proxy when studying the correlations. Correlations are calculated based on the 60 months ending on May 31, The tables listed below are a Symbol Key and a Correlation Matrix. The Symbol Key table also lists what each product may be considered a proxy for when studying the correlations. For this kind of analysis, a rule of thumb is that correlation coefficients of greater than 0.6 indicate correlated returns. Only the BGMI, BTop50 index, and the Lehman Aggregate Bond Index have low correlation to all other products. Some, including ishares Dow Jones U.S. Real Estate Index Fund (IYR), have only a few low correlations. The long only futures indexes, GSCI and DJUBSCI, actually have large correlations to stocks and bonds. Clearly the desired diversification from an investment in commodities can best be found in an actively managed futures product where long and short positions are taken and not from long only indexes. The Barclay Global Macro Index (BGMI) is interesting because it is a mix of futures trading programs and stock investing all related to commodities and currencies. Although its average annualized return is comparable to the BTop50 Index, its correlations to other products is not so low. Symbol Key Symbol Name Proxy GSCI S&P Goldman Sachs Commodity Index Long only commodity futures portfolio. IGNAX Ivy Global Natural Resources Stock fund investing natural resources and other basic commodity related companies. DJUBSCI Dow Jones - UBS Commodity Index Long only commodity futures portfolio. CRBCI RJ/CRB Commodity Long only commodities. VMIAX Vanguard Materials Index Fund Admiral Shares Materials Stocks tracking the MSCI US Investable Market Materials Index. VFINX Vanguard 500 Index Fund S&P Broad Stock Market. LSBDX Loomis Sayles Bond Fund Managed bond portfolio. IYR ishares Dow Jones U.S. Real Estate Index Fund Real Estate. BTop50 Barclay BTop50 Index Multiple Manager CPO. BGMI Barclay Global Macro Index Index of Global Macro Funds taking long and short positions in stocks, bonds, currencies, and commodities. LehmanBond Lehman Global Aggregate Bond Bonds. Correlation Matrix GSCI IGNAX DJUBSCI CRBCI VMIAX VFINX LSBDX IYR BTop50 BGMI LehmanBond GSCI IGNAX DJUBSCI CRBCI VMIAX VFINX LSBDX IYR BTop BGMI LehmanBond

11 Brookhaven Strategies, LLC Risk vs. Return Risk vs. Return charts are useful for comparing investments based on a gain versus pain basis. A standard measure of risk, pain, is how much the actual returns vary from the average return or the variation in return calculated as the annualized standard deviation. The gain or reward is the annualized return. The best investments combine a high annual return with a low annualized standard deviation. This combination would put them in the upper left area of the chart, while the worst performers appear toward the bottom right. The ishares Dow Jones U.S. Real Estate Index Fund (IYR) is an example of a non-commodity product that is a poor performer on a risk vs. return basis. The Barclay BTop50 Index (BTop50), again representing multiple manager futures funds, is well positioned with low risk and comparatively high return as are Barclay Global Macro Index (BGMI) and Lehman Aggregate Bond Index (Bond). Annualized Return (%) Bond BGMI BTop50 IYR LSBDX VFINX VMIAX CRBCI DJUBSCI IGNAX GSCI Annualized Standard Deviation (%)

12 Brookhaven Strategies, LLC 12 4 Conclusion To diversify a portfolio effectively with commodities, an investor must recognize the differences between commodities and other investment classes: there is no company in which to invest, there are limited term contracts for delivery, and importantly an investor should be agnostic about long versus short. All of these point away from standard stock strategies like buy and hold or value investing. This may explain why long only commodity indexes and ETFs perform so poorly relative to the BTop50. While several products exist for investing in commodities, historical analysis shows that actively traded managed futures programs recognize these differences and can provide returns that stand out above other types of commodity investments. A balanced portfolio consisting of stocks, bonds, and real estate could benefit from an allocation to commodity futures especially with a properly designed pool of CTAs that can provide steady, uncorrelated returns for long term capital appreciation. 5 Appendix: Investments and Indexes The products and indexes used in this study are listed and described in the following tables. They are in alphabetical order. Barclays BTop50 Index Information Source: BarclayHedge.com The BTOP50 Index seeks to replicate the overall composition of the managed futures industry with regard to trading style and overall market exposure. The BTOP50 employs a top-down approach in selecting its constituents. The largest investable trading advisor programs, as measured by assets under management, are selected for inclusion in the BTOP50. In each calendar year the selected trading advisors represent, in aggregate, no less than 50% of the investable assets of the Barclay CTA Universe. To be included in the BTOP50, the following criteria must be met: Program must have at least two years of trading activity; Program s advisor must have at least three years of operating history; and The BTOP50 s portfolio will be equally weighted among the selected programs at the beginning of each calendar year and will be rebalanced annually. Barclay Global Macro Index (BGMI) Information Source: BarclayHedge.com Global Macro managers carry long and short positions in any of the world s major capital or derivative markets. These positions reflect their views on overall market direction as influenced by major economic trends and or events. The portfolios of these funds can include stocks, bonds, currencies, and commodities in the form of cash or derivatives instruments. Most funds invest globally in both developed and emerging markets.

13 Brookhaven Strategies, LLC 13 Barclay Short Term Traders Index (STTI) Information Source: BarclayHedge.com The AlternativeEdge Short-Term Traders Index is designed to track the daily performance of a portfolio of short term CTAs. Rydex Commodities Strategy C (RYMJX) Information Source: Yahoo.com The investment seeks long-term capital appreciation. The fund invests in commodity-linked structured notes, ETFs that provide exposure to the commodities markets, and in commodity-linked derivative instruments, including swap agreements, commodity options, and futures and options on futures, and equity securities. It is nondiversified. Rydex Investments Currency Shares Information Source: CurrencyShares.com Rydex CurrencyShares Trusts are designed to track the price of the currency net of Trust expenses, which are expected to be paid from interest earned on the deposited foreign currency. Products: CurrencyShares Australian Dollar Trust (FXA) CurrencyShares British Pound Sterling Trust (FXB) CurrencyShares Canadian Dollar Trust (FXC) CurrencyShares Euro Trust (FXE) CurrencyShares Japanese Yen Trust (FXY) CurrencyShares Mexican Peso Trust (FXM) CurrencyShares Russian Ruble Trust (XRU) CurrencyShares Swedish Krone Trust (FXS) CurrencyShares Swiss Franc Trust (FXF) Dow Jones - UBS Commodity Index (DJUBSCI) Information Source: unspecified The DJ-UBSCI is composed of futures contracts on physical commodities. E-TRACS Constant Maturity Commodity Index ETN (UCI) Information Source: etf.stock-encyclopedia.com The UBS E-TRACS CMCI Total Return seeks to reproduce the performance of the UBS Bloomberg Constant Maturity Commodity Index Total Return. The CMCI is the first benchmark commodity index to diversify across both commodities and maturities. The ETN measures the collateralized returns from a basket of 27 commodity futures contracts representing the energy, precious metal, industrial metal, agricultural and livestock sectors. In addition, the commodity futures contracts are diversified across 5 constant maturities from 3 months up to 3 years.

14 Brookhaven Strategies, LLC 14 Fidelity Global Commodity Stock (FFGCX) Information Source: Yahoo.com The investment seeks capital appreciation. The fund invests at least 80% of assets in stocks of companies principally engaged in the energy, metals, and agriculture group of industries. It invests primarily in common stocks. The fund allocates investments across different countries and regions. It is non-diversified. Ivy Global Natural Resources (IGNAX) Information Source: Yahoo.com The investment seeks to provide long-term growth. Any income realized will be incidental. The fund invests normally at least 80% of assets in equity securities (including common stock, preferred stock and securities convertible into common stock) of companies of any size throughout the world that own, explore or develop natural resources and other basic commodities or supply goods and services to such companies. It seeks to be diversified internationally and therefore regularly invests in foreign companies and domestic companies that have principal operations in foreign jurisdictions. Lehman Aggregate Bond Index (LehmanBond) Information Source: Investopedia.com The index includes government securities, mortgage-backed securities, assetbacked securities and corporate securities to simulate the universe of bonds in the market. The maturities of the bonds in the index are more than one year. Loomis Sayles Bond Fund (LSBDX) Information Source: Yahoo.com The investment seeks high total investment return through a combination of current income and capital appreciation. The fund normally invests at least 80% of assets in fixed-income securities. It invests up to 35% of assets in lower rated fixed-income securities and up to 20% of assets in preferred stocks. The fund may invest in fixed-income securities of any maturity. PowerShares DB Commodity Double Long ETN (DYY) Information Source: etf.stock-encyclopedia.com The PowerShares DB Commodity Double Long Exchange Traded Note, the PowerShares DB Commodity Long Exchange Traded Note, the PowerShares DB Commodity Short Exchange Traded Note and the PowerShares DB Commodity Double Short Exchange Traded Note are the first U.S. exchange traded products providing investors with a cost-effective and convenient way to take a long, short or leveraged view on the performance of a broad-based commodity index. Each ETN is based on the Deutsche Bank Liquid Commodity Index, designed to reproduce the performance of certain wheat, corn, light sweet crude oil, heating oil, gold and aluminum futures contracts plus the returns from investing in three-month U.S. Treasury Bills.

15 Brookhaven Strategies, LLC 15 PowerShares DB Commodity Double Short ETN (DEE) Information Source: Yahoo.com The PowerShares DB Commodity Double Long Exchange Traded Note, the PowerShares DB Commodity Long Exchange Traded Note, the PowerShares DB Commodity Short Exchange Traded Note and the PowerShares DB Commodity Double Short Exchange Traded Note are the first U.S. exchange traded products providing investors with a cost-effective and convenient way to take a long, short or leveraged view on the performance of a broad-based commodity index. Each ETN is based on the Deutsche Bank Liquid Commodity Index, designed to reproduce the performance of certain wheat, corn, light sweet crude oil, heating oil, gold and aluminum futures contracts plus the returns from investing in three-month U.S. Treasury Bills. RJ/CRB Commodity Index (CRBCI) Information Source: crbtrader.com For nearly 50 years, this world-renowned index has served as the most widely recognized measure of global commodities markets. As a benchmark, the Reuters/Jefferies-CRB Index is designed to provide timely and accurate representation of a long-only, broadly diversified investment in commodities through a transparent and disciplined calculation methodology. S&P Goldman Sachs Commodity Index (GSCI) Information Source: unspecified The S&P GSCI is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The returns are calculated on a fully collateralized basis with full reinvestment. The combination of these attributes provides investors with a representative and realistic picture of realizable returns attainable in the commodities markets. Vanguard 500 Index Fund (VFINX) Information Source: Yahoo.com The investment seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks. The fund employs a passive management investment approach designed to track the performance of the Standard & Poor s 500 index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. It invests all, or substantially all, of assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

16 Brookhaven Strategies, LLC 16 Vanguard Materials Index Fund Admiral Shares (VMIAX) Information Source: Yahoo.com The investment seeks to track the performance of a benchmark index that measures the investment return of materials stocks. The fund employs a passive management investment approach designed to track the performance of the MSCI U.S. Investable Market Materials index. This index consists of all capitalization of stocks within the materials sector. It is nondiversified. ipath Dow Jones-AIG Commodity Index Total Return ETN (DJP) Information Source: etf.stock-encyclopedia.com The ipath Dow Jones-AIG Commodity Index Total Return ETN is linked to the Dow Jones-AIG Commodity Index Total Return and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. ishares S&P World Property ex-us ETF (WPS) Information Source: etf.stock-encyclopedia.com The ishares S&P World ex-u.s. Property Index Fund seeks investment results corresponding to the price and yield performance of the S&P/Citigroup BMI World ex-u.s. Property Index. ishares Dow Jones U.S. Real Estate Index Fund (IYR) Information Source: etf.stock-encyclopedia.com The ishares Dow Jones U.S. Real Estate Index Fund seeks to provide investment results that correspond generally to the price and yield performance to the performance of the real estate sector of the U.S. equity market, as represented by the Dow Jones U.S. Real Estate Index. ishares S&P GSCI Commodity-Indexed Trust (GSG) Information Source: Yahoo.com The investment seeks to track the performance of the GSCI Excess Return Index. The fund will invest in a portfolio of exchange-traded futures contracts tracked by the index. The index currently tracks 24 different commodities. It is weighted with approximately 67% invested in energy, 16% in agriculture, 7% in industrial metals, 7% in livestock and 3% in precious metals. The index is production weighted to reflect the relative significance of those commodities to the world economy. The fund is nondiversified.