Eclipse Capital Management

Global Monetary Program

TRADING APPROACH – GLOBAL MONETARY PROGRAM The Global Monetary Program’s Portfolio Management Platform provides the framework for the GMP’s systematic investment process. The platform consists of four distinct components or modules (Market Analysts, Portfolio Manager, Risk Manager and Trader), with each playing an important role in the portfolio management process. Individual Market Analysts form the foundation of the GMP’s multifactor platform and are a key component in Eclipse Capital’s investment process. External Market Analysts use data inputs outside of price and generate a trading opinion through the quantitative analysis of environmental, macroeconomic and intermarket data. Internal Market Analysts use price as the sole data input and use various pattern-recognition and statistical analysis techniques to identify and evaluate price trends. The job of the Portfolio Manager is to convert the Net Analyst Opinion for each market into specific recommended market positions. In doing this, the Portfolio Manager applies its Positioning Function to the Net Analyst Opinion, considers the portfolio’s risk allocation to that market, and uses current market volatility to convert the opinion into a position consisting of a specific number of contracts. This recommended position is then conveyed to the Risk Manager. The Risk Manager is responsible for the overall risk of the portfolio, and adjusts portfolio leverage in order to manage overall market exposure and to minimize downside risk. The Risk Manager takes into account the current Value-at-Risk (VaR) of the portfolio and recent changes in portfolio equity. Finally, after determining the desired level of portfolio leverage, the Risk Manager proportionally modifies the recommended positions of the Portfolio Manager, and then conveys these positions to The Trader. To further aid in risk management, trailing “stoploss” orders are generated and forwarded to The Trader to exit trades when markets are moving against an established position (although, depending on market circumstances, such “stop-loss” orders may be difficult or impossible to execute). The Trader is the real-time implementation component of the GMP platform. The Trader compares the desired positions computed by the Risk Manager with current positions, and any differences beyond a threshold level will result in a trade. Positions are monitored in real time, and orders, when generated, are executed virtually 24 hours a day by Eclipse Capital’s trading desk personnel. Trades executed are electronically reported back to The Trader, and are then conveyed to several different internal electronic databases. Eclipse Capital does not use unrealized profits in a particular futures contract as margin for additional contracts in the same or related futures products. Margin/equity ratios average about 10%, with a range of approximately 5-15% of assets managed, at minimum exchange margin requirements,but possibly above or below that range at certain times. Decisions on whether to include a particular futures contract in the GMP portfolio are based upon various factors, including liquidity, significance in terms of desired degrees of concentration, diversification and profit potential, both historical and at a given time. These decisions are based upon output generated by a proprietary program, but require the exercise of judgment by principals of Eclipse Capital. The decision not to trade specific contracts for certain periods or to reduce the number of contracts traded may result at times in missing significant profit opportunities, which otherwise would be captured by these strategies. There are occasions when the program indicates that no position is appropriate because the Net Analyst Opinion is not sufficiently strong to generate a long or short position in a particular contract or contract group. In addition to trading in futures contracts, Eclipse Capital may also employ trading techniques such as spreads and straddles and may buy or sell futures options. Eclipse Capital may alter its trading programs, including, without limitation, its trading strategies, commodity interests, and markets traded and trading principles, without approval from clients, if Eclipse Capital determines that such change is in the best interest of the accounts which it manages.