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Crestline Capital, LLC

QUARTERLYINVESTMENTUPDATE
FIRSTQUARTER2010

MarketsUpdate:AQuarterinReview
FirstQuarter2010

USLarge Companies Stocks +5.39%

USSmall Company Stocks +8.85%

USValue Stocks

USREIT Stocks

Interna?onal Developed Stocks +0.87%

Emerging Markets Stocks +2.45%

USBond Market

USTreasury OneMonth TreasuryBills +0.01%

+6.79%

+9.81%

+1.53%

STOCKS

BONDS

Marketsegment(Indexrepresenta?on)asfollows:USLargeCompanyStocks(S&P500Index);USSmallCompanyStocks(Russell2000Index),USValueStocks(Russell1000ValueIndex).USReal EstateMarket(DowJonesUSSelectREITIndex),Interna?onalDeveloped(MSCIEAFEIndex(netdiv.)),EmergingMarkets(MSCIEmergingMarketsIndex(grossdiv)),USBondMarket(Barclays CapitalUSAggregateBondIndex),andTreasury(OneMonthUSTreasuryBills).TheS&PdataareprovidedbyStandard&Poor'sIndexServicesGroup.RusselldatacopyrightRussellInvestment Group19952010,allrightsreserved.MSCIdatacopyrightMSCI2010,allrightsreserved.DowJonesdata(formerlyDowJonesWilshire)providedbyDowJonesIndexes.USlongtermbonds,bills, andina?ondataStocks,Bonds,Bills,andIna?onYearbook,IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinqueeld).

MarketsUpdate:AQuarterinReview
FirstQuarter2010 TheUSequitymarketcon?nueditsstrongperformanceintherstquarterof2010,thefourthconsecu?vequarterwith aboveaveragereturns.ThebroadUSmarketgainedabout6%inthequarter,withallassetclassesdeliveringsolidgains again.Performanceinotherdevelopedmarketsaroundtheworldwasmixed. Europeanmarketsasawholehadnega?vereturnsforthequarter,withSpain,Greece,andPortugalallsueringdouble digit losses. On the other hand, developed markets in the Asia Pacic region, led by Japan, which had an outstanding quarter,generallyfaredmuchbeler.TheUSdollargainedgroundagainstmostmajorcurrencies,especiallytheeuroand thepound,whichhurtthedollardenominatedreturnsofdevelopedmarketequi?es. Aner being the topperforming asset class for the past four quarters, emerging markets cooled o in the rst quarter, although returns were s?ll solidly posi?ve. As in the case of developed markets, there was much dispersion in the performanceofdierentemergingmarketsandassetclasses.Mostemergingmarketsexperiencedsolidlyposi?vereturns intherstquarter,butsomeofthelargermarketssuchasBrazil,China,andTaiwanhadnega?vereturns.TheUSdollar lostgroundagainstthemainemergingmarketcurrenciesintherstquarter,whichcontributedtothedollardenominated returnsofemergingmarketequi?es. Valuestocksoutperformedgrowthstocksacrossallmarketcapitaliza?onsegmentsintheUS,whiletheoppositewastrue inotherdevelopedmarkets.Inemergingmarkets,largecapvaluestockstrailedlargecapgrowthstocks,whilesmallcap valuestocksoutperformedsmallcapgrowthstocks. Alongthemarketcapitaliza?ondimension,smallcapsoutperformedlargecapsintheUS,inotherdevelopedmarkets,and inemergingmarkets. Real estate securi?es were among the top performers in the rst quarter in the US, but they had a at performance in otherdevelopedmarkets. Fixedincomesecuri?eshadposi?vereturnsintherstquarter.Longertermsecuri?estendedtohavebelerperformance thanshorttermones.
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TimelineofEvents:AQuarterinReview
FirstQuarter2010

Kranbuys Cadburyinone ofthelargest transna?onal takeoverssince thecreditcrunch


Jan19

Apple introduces newiPad tablet


Jan29

2010Winter Olympics kickoin Vancouver, Canada


Feb12 Feb24

Oneofthe strongest earthquakeever recordedstrikes southcentral Chile


Feb27 Mar4

PresidentObama signslandmark healthcare reform legisla?on


Mar23

Jan12

Earthquakehits Hai?andinone ofthemost devasta?ng natural disastersofthe past20years

USquarterly GDPgrowthis strongestinsix years

AkioToyoda, ToyotaMotor Corpora?ons CEO,tes?es beforeCongress regardingrecent safetyproblems

Greecesdebt crisisescalates leadingtoanIMF/ EuropeanUnion bailoutpackage

Googleclosesits Chinasearch websiteina growing controversyover censorship

BeyondtheQuarter:SurveyofLongTermPerformance
AsofMarch31,2010 Annualized(%)
Index 1YearEnding 12/31/2009 3YearsEnding 5YearsEnding 12/31/2009 12/31/2009 10YearsEnding 12/31/2009 20YearsEnding 12/31/2009 SinceIncep?on (Incep?ondate)

USLargeCompanyStocks S&P500Index USSmallCapStocks Russell2000Index USValueStocks Russell1000ValueIndex USRealEstateInvestmentTrustStocks DowJonesUSSelectREITIndex Interna?onalStocks MSCIEAFEForeignStockIndex MSCIEmergingMarketsIndex Bonds SBBILongTermCorporateBonds SBBIOneMonthUSTreasuryBills

49.77

4.17

1.92

0.65

8.66

9.85
(01/1926)

62.76

3.99

3.36

3.68

8.93

11.47
(01/1979)

53.56

7.33

1.05

3.10

9.36

12.21
(01/1979)

113.47

11.99

3.38

11.38

9.51

12.31
(01/1978)

54.44 81.55

7.02 5.46

3.75 16.00

1.27 10.11

5.25 11.12

9.45
(01/1970)

13.79
(01/1988)

19.43 0.08

5.30 1.71

4.92 2.73

7.55 2.63

8.09 3.75

5.83
(01/1926)

3.65
(01/1926)

TheS&PdataareprovidedbyStandard&Poor'sIndexServicesGroup.RusselldatacopyrightRussellInvestmentGroup19952010,allrightsreserved.MSCIdatacopyrightMSCI2010,all rightsreserved.DowJonesdata(formerlyDowJonesWilshire)providedbyDowJonesIndexes.USlongtermbonds,bills,andina?ondataStocks,Bonds,Bills,andIna?onYearbook, IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinqueeld).Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreectthe expensesassociatedwiththemanagementofanactualporsolio.Pastperformanceisnotaguaranteeoffutureresults.

ChangeinValueof$10,000InvestedinVariousMarkets
April1,2009March31,2010
Q1 2010

CHANGEINVALUEOF$1 AssetClass USLargeCompanyStocks USSmallCapStocks USValueStocks USRealEstateInvestmentTrustStocks Interna?onalDevelopedStocks EmergingMarketStocks FixedIncomeCorporateBonds ShortTermGovernmentBonds Index S&P500 Russell2000 Russell1000Value DowJonesUSSelectREIT MSCIEAFE MSCIEmergingMarkets LongTermCorporateBonds OneMonthUSTreasuryBills 1Year $1.50 $1.63 $1.54 $2.13 $1.54 $1.82 $1.19 $1.00 5Years $1.10 $1.18 $1.05 $1.18 $1.20 $2.10 $1.27 $1.14 10Years $0.94 $1.44 $1.36 $2.94 $1.13 $2.62 $2.07 $1.30 20Years $5.26 $5.53 $5.98 $6.15 $2.78 $8.24 $4.74 $2.09
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TheS&PdataareprovidedbyStandard&Poor'sIndexServicesGroup.RusselldatacopyrightRussellInvestmentGroup19952010,allrightsreserved.MSCIdatacopyrightMSCI2010,all rightsreserved.DowJonesdata(formerlyDowJonesWilshire)providedbyDowJonesIndexes.USlongtermbonds,bills,andina?ondataStocks,Bonds,Bills,andIna?onYearbook, IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinqueeld).Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreectthe expensesassociatedwiththemanagementofanactualporsolio.Pastperformanceisnotaguaranteeoffutureresults.

ValueofStockMarketsAroundtheWorld
January1990March2010
Weights Numberof Countries UnitedStates DevelopedMarkets EmergingMarkets Total 1 22 22 45 Numberof Stocks 2,949 3,503 2,551 9,003 TotalValue 12.64Trillion 12.82Trillion 3.79Trillion 29.25Trillion March31,2009 43.21% 43.83% 12.96% 100.00% ChangeFrom PreviousQuarter 0.93% 0.86% 0.07% 01/903/10 Average 44.69% 50.64% 4.67%

Globalmarketcapitaliza?onweightsarenotsta?c,theychangeacross?me.
Developedmarketssecuri?esandcommodi?esdataprovidedbyBloomberg.EmergingMarketsdataprovidedbyInterna?onalFinanceCorpora?on.TheRussell3000Indexisusedastheproxy fortheUSmarket.TheproxiesforthenonUSdevelopedandemergingmarketsaretherespec?vedevelopedcountryandemergingcountrypor?onsfromtheMSCIAllCountryWorldIMIexUSA Index.TheproxiesfortheUK,Canada,andAustraliaaretherelevantsubsetsofthedevelopedmarketproxy.

TheRandomnessofQuarterlyReturns
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 Highest 17.64 4.01 15.05 14.52 3.66 2.14 0.58 4.78 23.36 1.02 34.84 35.44 9.18 9.81 ? Return Russell 2000 10.12 3.74 6.98 2.71 1.97 0.52 0.53 0.43 0.20 0.03 31.46 21.04 8.58 8.85 ?

Thistableshowsfromtoptobolom the highest returning asset classes div.) each year over the last 14 quarters. ) Each asset class is color coded basedonthelegendbelow. REIT
Lowest Return

8.90 2.35 6.28 2.56 0.93 1.13 0.80 1.12 21.15 11.01 25.86 19.36 6.04 6.79 8.85 1.95 4.93 2.03 1.62 8.69 1.17 6.11 21.94 12.43 20.68 19.28 4.22 5.39 8.00 1.26 4.42 1.42 3.33 8.72 2.49 8.37 22.18 13.14 16.69 18.24 3.88 2.45 6.70 1.24 1.26 1.14 4.58 9.45 2.72 8.54 26.12 14.95 15.93 15.61 2.44 1.53 1.35 0.64 1.88 0.24 5.80 9.90 5.32 20.67 27.56 16.77 8.24 11.09 0.01 1.35 1.24 0.02 9.36 3.09 13.54 10.92 5.39 26.86 39.95 33.92 0.02 0.03 2.17 0.01

? ? ? ? ? ?

S&P500 Russell2000 Russell1000Value MSCIWorldexUSA MSCIEmergingMarkets(grossdiv.) DowJonesUSSelectREIT OneMonthUSTreasuryBills LongTermCorporateBonds

Thelackofapalernindicatesthatpickingwhichassetclasses willbethebestorworstperformersisvirtuallyimpossible. InQ42008,forexample,theMSCIEmergingMarketsIndexwas thesecondtoworstperformingassetclass.Aquarterlaterit wasrightupatthetop. Porsolioscombiningthesevariousinvestmentswillavoid extremereturns.

TheS&PdataareprovidedbyStandard&Poor'sIndexServicesGroup.RusselldatacopyrightRussellInvestmentGroup19952010,allrightsreserved.MSCIdatacopyrightMSCI2010,all rightsreserved.DowJonesdata(formerlyDowJonesWilshire)providedbyDowJonesIndexes.USlongtermbonds,bills,andina?ondataStocks,Bonds,Bills,andIna?onYearbook, IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinqueeld). Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreectthe expensesassociatedwiththemanagementofanactualporsolio.Pastperformanceisnotaguaranteeoffutureresults.

ReturnsofGloballyDiversiedPorsolios
AsofMarch31,2010 AnnualizedReturns(%)
Percent 100%GlobalStocks 75/25 50/50 25/75 100%TreasuryBills Q12010 3.24 2.48 1.69 0.87 0.01 OneYear 56.31 40.35 25.71 12.31 0.08 ThreeYears 3.84 1.97 0.41 0.81 1.71 FiveYears 4.48 4.40 4.07 3.51 2.73 TenYears 1.09 1.77 2.25 2.53 2.63 TwentyYears 7.15 6.54 5.77 4.83 3.75

Posi?vevs.Nega?veMonths:January1988March2010,Total267months

GlobalStocksrepresentedbyMSCIAllCountryWorldIndex(grossdiv.)andTreasuryBillsrepresentedbyUSOneMonthTreasuryBills.DatacopyrightMSCI2010,allrightsreserved.Stocks, Bonds,Bills,andIna?onYearbook,IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinqueeld).Indexesarenotavailablefordirectinvestment.Index performancedoesnotreecttheexpensesassociatedwiththemanagementofanactualporsolio.Pastperformanceisnotaguaranteeoffutureresults.

USStockReturns
AsofMarch31,2010 Returns(%) AssetClass Marketwide LargeCap LargeCap LargeCapValue LargeCapGrowth SmallCap SmallCapValue SmallCapGrowth Index Russell3000 S&P500 Russell1000 Russell1000Value Russell1000Growth Russell2000 Russell2000Value Russell2000Growth Q12010
5.95 5.39 5.70 6.79 4.65 8.85 10.03 7.61

OneYear
52.44 49.77 51.57 53.56 49.75 62.76 65.06 60.31

ThreeYears Annualized
3.99 4.17 3.98 7.33 0.78 3.99 5.71 2.42

Alookatthedeterminantsofequityperformancerela?vepriceandmarketcapitaliza?onprovides someinsightintothesourcesofreturns. Historically,valuestocks,asmeasuredbythera?oofbooktomarketequity(BtM),haveoutperformed growthstocks,andthatwasindeedthecaseintherstquarter. Historically,smallstockshaveexperiencedhigherreturnsthanlargestocks,andthatwasindeedthe caseintherstquarter.

RusselldatacopyrightRussellInvestmentGroup19952010,allrightsreserved.Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreecttheexpensesassociated withthemanagementofanactualporsolio.Pastperformanceisnotaguaranteeoffutureresults.

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Interna?onalStockReturns
AsofMarch31,2010
AssetClass Marketwide DevelopedLargeCap DevelopedSmallCap DevelopedValue DevelopedGrowth EmergingMarketsLargeCap EmergingMarketsSmallCap EmergingMarketsValue EmergingMarketsGrowth Index MSCIAllCountryWorldexUSA MSCIEAFE MSCIEAFESmall MSCIEAFEValue MSCIEAFEGrowth MSCIEmergingMarkets MSCIEmergingMarketsSmall MSCIEmergingMarketsValue MSCIEmergingMarketsGrowth Q12010 1.58 0.87 4.76 0.24 1.96 2.40 5.07 2.35 2.45

Returns(%)
OneYear 60.93 54.44 70.02 58.52 50.61 81.08 118.10 83.89 78.32 ThreeYears Annualized 4.17 7.02 8.27 8.40 5.70 5.16 7.44 8.00 2.32

IMPACTOFCURRENCYFLUCTUATIONSONRETURNSFORINVESTORSINUSDOLLARS
OneYearReturnsinUSDollarsandLocalCurrency ThreeYearAnnualizedReturnsinUSDollarsandLocalCurrency

MSCIdatacopyrightMSCI2010,allrightsreserved.Interna?onaldevelopedrepresentedbyMSCIEAFEindexandEmergingMarketsbyMSCIEmergingMarketsIndex.Indexesarenotavailable fordirectinvestment.Indexperformancedoesnotreecttheexpensesassociatedwiththemanagementofanactualporsolio.Pastperformanceisnotaguaranteeoffutureresults.

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MSCICountryReturnsinUSDollarsandLocalCurrency
AsofMarch31,2010

TENYEARPERFORMANCERANKINGOFMARKETSAROUNDTHEWORLDINUSDOLLARSASOFDECEMBER31,2009

MSCIdatacopyrightMSCI2010,allrightsreserved.

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RealEstateInvestmentTrusts(REIT)Stocks
AsofMarch31,2010 Returns(%)
Index DowJonesUSSelectREITIndex S&PGlobalexUSREITIndex(grossdiv.) Q12010 9.81 0.04 OneYear 113.47 67.42 ThreeYears Annualized 11.99 15.91

NumberofREITStocks

TotalValueofREITStocks

NumberofREITstocksandtotalvaluebasedonthetwoindices.DowJonesUSSelectREITIndexdataprovidedbyDowJones.S&PGlobalexUSREITIndexdataprovidedbyStandardand Poors.Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreecttheexpensesassociatedwiththemanagementofanactualporsolio.Pastperformanceisnota guaranteeoffutureresults.

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BondReturns
AsofMarch31,2010 Returns(%)
Index SBBIOneMonthUSTreasuryBills BankofAmericaMerrillLynchThreeMonthTBills BankofAmericaMerrillLynchOneYearUSTreasuryNote Ci?groupWorldGovernmentBond15Years(hedged) SBBIUSLongTermGovernmentBonds BarclaysCapitalCorporateHighYield BarclaysCapitalMunicipalBonds BarclaysCapitalUSTIPSIndex Q12010 0.01 0.01 0.25 0.76 1.12 4.62 1.25 0.56 One Year 0.08 0.17 1.06 2.29 8.38 56.18 9.69 6.18 ThreeYears Annualized 1.71 1.99 3.45 4.85 5.67 6.65 4.56 6.01

Yields on shortterm Treasury bills rose in the rst quarter rela?vetotheendof2009, while yields on longterm Treasurysecuri?esfellintherst quarter. As a result, the yield curve alened slightly over the quarter. The dierence in yield between tenyear Treasury bonds and onemonth US Treasury bills was 369 basis points at the end of the rst quarter, compared to 381 basis pointsattheendof2009.

USTreasuryYieldCurve

BarclaysCapitaldata,formerlyLehmanBrothers,providedbyBarclaysBankPLC.USlongtermbonds,bills,ina?on,andxedincomefactordataStocks,Bonds,Bills,andIna?onYearbook, IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinqueeld).Ci?groupbondindexescopyright2010byCi?group.TheMerrillLynchIndicesareusedwith permission;copyright2010MerrillLynch,Pierce,Fenner&SmithIncorporated;allrightsreserved.Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreectthe expensesassociatedwiththemanagementofanactualporsolio.Pastperformanceisnotaguaranteeoffutureresults.

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QuarterlyTopic:TheLostDecade,ForSome.
Many in the popular nancial media claim that 20002009 was a dismal period for US investors. Some commentators are describing the tumult as the Lost Decade in stocks. From a narrow market perspec?ve, they are right. Investors who concentratedinUSlargecapstocksdidnotbreakeven:onedollarinvestedintheS&P500inJanuary2000turnedintoninety one cents over the next ten years. The results were even worse for investors who made concentrated bets on individual companiesthatul?matelyfailed.AmongthesearefamiliarnamessuchasAIG,Enron,MCI,CircuitCityandBearStearns. However,fordisciplinedandgloballydiversiedinvestors,thelasttenyearswerenotalostdecade. Assuggestedinthegraph below,investorswhodeployedtheircapitalacrossabroadmixofdomes?c,developed,andemergingmarketsweregenerally rewardedwithposi?vereturns.Furthermore,investorswithgreaterneedforstabilitycouldhavebalancedtheriskofstockswith thelowervola?lityofbonds,andpoten?allyavoidedthelargeuctua?onsofthestockmarket. So,whileitwasaLostDecadeforsome,thosewhowalkedadisciplinedandbroadlydiversiedpathwereshelteredfromthe worstofthestorm,reinforcingthemeritsofthisapproachtoinves?ng.

TheS&PdataareprovidedbyStandard&Poor'sIndexServicesGroup.RusselldatacopyrightRussellInvestmentGroup19952010,allrightsreserved.MSCIdatacopyrightMSCI2010,all rightsreserved.DowJonesdata(formerlyDowJonesWilshire)providedbyDowJonesIndexes.Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreectthe expensesassociatedwiththemanagementofanactualporsolio.Diversica?onneitherguaranteesaprotnorpreventsaloss.Indexisnotavailablefordirectinvestment.Past performanceisnoguaranteeoffutureresults.

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CC

Crestline Capital, LLC


MichaelMoore 1120CrestlineCourtLakeOswegoOR97034 Telephone:5036354457 mike@crestlinecapital.net www.crestlinecapital.net

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