Orion Investment Management Ltd.

SafeHarbor 2 Year Treasury Enhancement

Product and Performance Review

November, 2010

Orion Investment Management Ltd. 11/17/2010 1

Investment Summary
Accounts looking for a better alternative to fixed deposits, savings and
Suitability money market funds irrespective of market conditions

Actively managed short term income program focused on absolute

return utilizing systematic asset deployment in conjunction with
Strategy strategic macro research. The combined approach focuses heavily on
risk control

Cash only, no derivatives. US Dollar denominated debt securities with

Universe a primary focus on the Treasury Market

To generate a high level of current income, consistent with the

Objective preservation of invested capital while maintaining liquidity

Benchmark US 2 Year Treasury benchmark

Orion Investment Management Ltd. 11/17/2010 2

Investment Strategy
 Quantitative models and active management add value
irrespective of business cycle.

 Incorporating a strategic macro economic outlook helps

avoid emerging risks and dampen volatility by identifying
structural changes in the investment landscape.

 Operational transparency increases confidence in the Manager

and the process

Orion’s ability to outperform without relying on credit and

derivative instruments for excess return is a distinguishing feature
of the fund

Orion Investment Management Ltd. 11/17/2010 3

Investment Strategy - Model Process
The SafeHarbor Treasury Enhancement Model employs a 3-step process
for selecting the appropriate target sector of the Yield Curve

 Step 1 - Maturity Sector Choice: Our Maximal Expected Information Ratio

Model examines each portion of the yield curve and finds the best place to be
through exchanging a small amount of risk for enhanced yield.

 Step 2 - Sector Fair Value Analysis: On selection of the appropriate

maturity sector, a systematic analysis is performed on the entire universe of
assets in that sector. The best asset is selected on the basis of highest yield-to-
liquidity.

 Step 3 - Portfolio Construction: an optimal weighting is calculated between

the extension sector and the client’s chosen short term money market
instrument so as to bound Portfolio volatility within defined constraints.

Orion Investment Management Ltd. 11/17/2010 4

Investment Strategy - Strategic Macro Economic Outlook
Incorporating a Macro Economic outlook as a risk overlay to the SafeHarbor Investment
model decreases volatility, resulting in a higher risk adjusted return for the investor.

• QE2 not the solution. The cost of issuing debt is greater than the return on
Market investment
(Short term) • Private sector net free cash flows strongest since 1970
• Decreased policy visibility means High near term volatility of bond returns

• Rising tide of Protectionism dangerous for free trade

Economic • US Small Business and Housing showing signs of basing
(Medium term) • China rising rates

• European Austerity and Ongoing Crisis

Structural • Rising Tide of Protectionism
• Big changes in solvency requirements of Financial Institutions and Money
(Long term) Markets
• AVOID U.S. Municipals, any exposure to European Debt problems

Our secular economic view remains constructive on fixed income markets. However, with Fed
Fund Futures pricing in lower than 25 bps yields through to 2012, the QE2 run up and Mid
term election policy changes, means huge near term volatility with no clear trend.
Conclusion: Take profit on US government Bonds move into Cash Repo in order to reduce
volatility of returns.

Orion Investment Management Ltd. 11/17/2010 5

Performance versus Benchmark
Highlights 2010 148 Basis Points of Excess Return

2010 YTD 3.60% return vs SafeHarbor 2YTR

Benchmark return of 2.12% 8

7
The underperformance during
6
the first half of 2009 was due to
5
excessive volatility and market
disruptions. Capital preservation 4

more important than yield 3

From Mid 2009 to date we 1

were able to minimize the 0

volatility of returns and out Nov-07
-1
Jun-08 Dec-08 Jul-09 Jan-10 Aug-10 Feb-11

perform -2

Orion Investment Management Ltd. 11/17/2010 6

Performance Since Inception
Return Statistics Since Inception Historical Frequency Distribution of Returns
March 2008 SafeHarbor vs. 2 Year Total Return Benchmark
2 Year Total 40%
SafeHarbor SafeHarbor 2Y TR
Return Index* 35%
Annualized 30%
2.86% 2.28%
Return 25%

Annualized Std 20%

1.34 1.78
Deviation 15%

Information 10%
2.13 1.28
Coefficient 5%
0%
* source: Bloomberg data -1 -0.75 -0.5 -0.25 0 0.25 0.5 0.75 1 1.25

Key Notes:
 The Graph shows that SafeHarbor performance is positively skewed with less downside
than the 2 year benchmark.
Information Coefficient shows that the risk adjusted return is significantly better than
investing in the benchmark.

Orion Investment Management Ltd. 11/17/2010 7

Portfolio Investment Universe – Snapshot as of 14Nov10
Public Sector S&P Comments Weighting Duration
(Years)
US Treasury collateral held at Custodian. Repo rate is
US Treasury Reverse Repo AAA
the effective daily fed funds rate
24% 0.01
US Government T Bills AAA Considered the risk free rate
US Government Notes, AAA Ultra safe but low yield
Bonds, Strips
US Agency Bonds AAA Higher yield, not explicitly backed by US Govt.

FDIC (TARP) Bonds AAA Ultra safe, higher yield, limited supply 48% 1.69
FDIC insured CDs AAA Higher yield than T-Bills but small liquidity risk

USD Foreign Government AAA USD denominated, decent yields, ultra safe. 28% 3.48
Guaranteed Bonds Filtered using countries that have low debt to GDP
ratios - Canada, Norway, Sweden, Australia
US TIPS AAA Hedges inflation risk, but low nominal yield

Supranational AAA Backed by IMF, World Bank, etc. Decent yields

Private Sector
High Grade Corporate Bonds AA + Low default risk, attractive yields versus Public sector debt, Net
free cash flow lowest in 40 years

Investment Grade Bonds BBB+ Some default risk, attractive yields

Portfolio Average AAA 100% 1.79

Orion Investment Management Ltd. 11/17/2010 8

Orion Management Team
• Mr. Eric S. Hirschberg CEO, is responsible for business development, marketing
and contributes to product and trading strategy development. Mr. Hirschberg holds a
B.A. from the University of Delaware and MSc. in Statistics & Operations Research
from New York University's Stern School of Business.
• Mr. Andrew M. Marsh CIO, is responsible for trading, operations and contributes to
product and trading strategy development. Mr. Marsh holds a B.Sc. in Economics
from George Mason University, Virginia.
• Dr. Niklas G. Traub CTO, is responsible for quantitative research and oversees
product and trading strategy development. Dr. Traub holds a B.Sc. from the California
Institute of Technology and a PhD. in Computer Science, from Edinburgh University.
• Dr. Eugene A. Durenard CRO is responsible for risk oversight and contributes to
product and trading strategy development. Dr. Durenard holds a DEA in Mathematics
from Ecole Normale Superieure in Paris and a PhD. in Mathematics from Harvard
University.

The principals have over 60 years of combined investment and risk management experience and a
strong network of connections in the Insurance, Reinsurance, Pension and Endowment markets

Orion Investment Management Ltd. 11/17/2010 9