2010 Outlook by mifei


									                                                                                                              January 2010

                                                              2010 Outlook:
                                            “ From Uncharted to Navigable Waters ”

Gulf Stream Asset Management          Key Observations:
LLC was founded in 2002 by a team
of established professionals with
extensive experience in leveraged
loans and debt capital markets.          We would characterize current new issue trends in non-investment grade
                                         credit as a cyclical trend, not a secular shift, in favor of investors.
Gulf Stream currently manages
over $3.6 billion of high-yield          We expect credit spreads to remain relatively attractive throughout 2010.
corporate assets.                        Concerns about rising interest rates will attract investors to the floating rates
                                         of leveraged loans.
Gulf Stream’s team consists of 29
professionals, with 17 dedicated to      Most corporate issuers are expressing muted expectations with respect to
credit research and analysis.            revenue growth in 2010. It is possible that forecasts are somewhat
                                         conservative since management teams perceive little upside in
Headquartered in Charlotte, North        “overpromising” in the current environment.
Carolina, the firm has an office in
New York City.                           Many leveraged credit issuers survived the past 18 months by wringing cash
                                         out of working capital as revenues contracted, which reduced the need to
Gulf Stream is an investment             access revolver borrowings. The ability to fund growth, when it occurs, in a
adviser registered under the             capital-constrained environment will vary greatly among companies. We are
Investment Advisers Act of 1940          skeptical as to what extent the broad economy can recover while credit
with the Securities and Exchange         remains constrained.
                                         Coming off a peak default rate of 10.8% in 2009, we anticipate the 2010
                                         leveraged loan defaults to be 1.25%-1.50% each quarter this year, leading to a
                                         year-end default rate in the 5.0%-6.0% range.

                                         Fiscal and policy stimulus will fade in 2010, but housing and financial weakness
For more information about Gulf          will not be as large a negative as in 2009. The stock market recovery has
Stream, visit our website:               helped household wealth and consumer sentiment. A double dip recession
www.gulfstreammgmt.com                   and spike in unemployment would have negative implications for credit and

                                         Understanding the investment limitations of the CLO portfolios (which
                                         control roughly half of the leveraged loan term loans) presents attractive
                                         investment opportunities, e.g. select Triple-C rated assets with solid
The Rotunda Building                     collateral packages, while toxic to CLO structures, yield outsized returns
4201 Congress Street, Suite 475          given the expected recovery.
Charlotte, NC 28209
704.552.7711                             Corporate fundamentals have improved and central banks have provided
                                         sufficient stimulus to avoid a total meltdown in the global economy.
The Helmsley Building                    Opportunities for performance in 2010 and beyond are industry and credit-
230 Park Avenue, Suite 3320              specific – both from a long/short and long only perspective. Credit selection
New York, NY 10021                       will differentiate performance as the economy slowly recovers.

January 2010                                                                                                       Page 1
                                                                                                      January 2010

                                                     2010 Outlook:
                                  “ From Uncharted to Navigable Waters ”

                             Market Review – The Correction:

                                The demand for leveraged loans and structured vehicles (CLOs) grew at an
                                exponential pace from 2005 to mid-2008. The period saw new initiatives,
                                which offered even greater access to the loan asset class, such as LCDS and
                                TRS, both offering cheap financing alternatives. While increased volatility
                                was expected, the massive revaluation that began in 2008 caught much of
                                the market flat-footed. In a market historically comprised of “buy & hold”
                                investors, new entrants including mark-to-market and relative value
                                investors introduced more volatility and divergent investment criteria to
                                the asset class.

                                Sparked by the break down of the ABS markets, investors rapidly
                                attempted to pull money out of the financial markets. In a desperate
                                attempt to access liquidity and meet margin calls, asset managers made
                                frequent use of increasingly larger BWICs, a relatively novel concept in loan
                                world. Without a “natural” buyer of the asset class, loan prices collapsed.

                                Following over $5B of BWICs in the Q4 2008 (roughly equal to the total
   Loan prices bottomed         BWIC volume for all of 2009), loan prices bottomed out on 12/16/2008,
    out on 12/16/2008,          implying historic spreads of nearly 20%. At these yields, loans became too
 implying historic spreads      compelling to ignore. Higher beta players (distressed, equity and hedge
     of nearly 20% - 3          funds) began to re-enter the market. Secured loans became the flight-to-
   months before other          quality investment, despite their non-investment grade ratings. As money
                                shifted to loans, equities, high-yield and CDS continued their downward
         markets                slide for three more months.

                                                        Leveraged Loan Market
                                     110.0                                                          L+2100
                                     100.0                                                          L+1700
                                      90.0                                                          L+1500
                                                                 Loan Spreads Peak:
                                      80.0                      12/16/2008 @ L+1963.53              L+1100
                                      70.0                                                          L+700
                                      60.0                                                          L+500
                                      50.0                                                          L+100

                                                      Avg Bid                    4-yr Disc Spread

                                    Source: Standard & Poor’s LCD

January 2010                                                                                                 Page 2
                                                                                                                        January 2010

                                                                          2010 Outlook:
                                  “ From Uncharted to Navigable Waters ”

       With limited DIP         Defaults in high-yield and leveraged loans had been limited since the market
                                correction in 2001-02. But the abrupt economic downturn in late 2008 led
   financing and no other
                                to a surge in defaults beginning early in 2009. The first three months of
       rescue financing         2009 saw loans default at a 19.5% annualized rate.
       options, defaults
     skyrocketed in 2009                                                Distressed Debt and Default Rate

                                   % of the high-yield market
                                                                                         Default Rate (Dec 09): 10.2%
                                                                                 Distressed Debt (Dec 09): 0.8%

                                                                              Distressed debt         Default rate
                                          Source: JP Morgan

                                Recoveries, which had historically averaged over 70%, were extremely low,
                                as “rescue” financing was unavailable and DIP financing was generally
                                difficult to procure. With performing loans trading in the 60’s, there was
                                very little incentive for the traditional distressed buyers to take on the
                                troubled credits.

                                While defaults and lower recoveries stung CLO structures, the haircuts
    The haircuts from a         from a spike in Triple-C rated assets overwhelmed them. As with
                                defaulted assets, bids for Triple-C paper collapsed as potential supply
   spike in Triple-C rated
                                continued to expand. Triple-C buckets quickly overflowed as a wave of
    assets overwhelmed          downgrades hit. The subsequent haircuts to the structures were very
            CLOs                punitive given the low marks for Triple-Cs, causing a breach of OC tests in
                                the majority of structures.

                             Market Review – The Recovery:

                                Almost as quickly as they fell, prices moved up on low volumes. By Spring
     The loan market            2009, as other markets began to recover, loan volumes and trading activity
  recovery was nearly as        began to substantially improve. Performing, higher-rated assets quickly
    fast as the market          moved back to the 80’s, leaving single-Bs and triple-Cs looking relatively
                                attractive. Lower-rated assets began to catch a bid and ran up significantly,
          collapse              helping bring attention to the distressed and defaulted

January 2010                                                                                                                Page 3
                                                                                                     January 2010

                                                      2010 Outlook:
                                   “ From Uncharted to Navigable Waters ”

   Encouraged by the run-        assets. Opportunistic DIP financing surfaced and distressed buyers left the
                                 now “expensive” par market to bid the weaker credits. If “The Perfect
      up in the stronger
                                 Storm” was the over-used catch-phrase of 2008; then “Positive Feedback
    credits, investors were      Loop” would be the term to describe the 2nd half of 2009.
       willing to bid the
      weaker : creating a                 Leveraged Loans: Yield-to-Maturity, by rating
  “positive feedback loop”                                BB-/Ba3          B+/B1             B/B2
     throughout the year
                                   31-Dec-08               12.46%         14.93%            19.00%
                                   31-Mar-09               8.87%           9.70%            12.80%
                                   30-Jun-09               5.11%           6.09%             6.46%
                                   30-Sep-09               3.84%           4.94%             4.35%
                                   31-Dec-09               3.97%           4.29%             4.98%

                                     Source: Standard & Poor’s LCD

                              Market Review – The Current Environment:

                                 Coming off a year with 50% returns, the non-investment grade loan and
                                 high-yield bond market is unlikely to reach these lofty returns in 2010.
   Investors now focused         Presently, investor attention is focused on current yield. Risk appears to be
    on current yield with        a secondary concern, as the default environment has dramatically improved
                                 and high-yield bonds seem to be the asset class of choice. Issuers,
   risk appearing to be a
                                 preferring the lack of covenants, longer maturities, and certainty of
     secondary concern           execution have helped high-yield issuance set a record pace, while new loan
                                 issuance continues to languish.

                                 High yield issuance accounted for $11.8B of leveraged loan prepayments in
                                 the 4th quarter of 2009, roughly half of the total $23B of high-yield takeout
                                 for the entire year. This prepayment activity is a major theme as we begin
                                 2010. Even without the formation of CLOs and the availability of TRS,
                                 activity in the leveraged loan market in 2009 created a cash surplus of
                                 $44.1B, as the anemic new-issue market could not keep pace with the
                                 deluge of repayments. CLOs continue to scour the well-picked-over
                                 secondary market in order to stay invested. Secondary purchases are
   Secondary prices for          balanced with the desire to purchase assets in the relatively attractive new-
                                 issue market, which currently provides higher spreads with LIBOR floors,
  better-rated credits are
                                 as well as stronger capital structures and covenants. Secondary prices for
   back in the high 90’s         better-rated credits have returned to the high 90’s, with many names
                                 trading above par despite the lack of call protection.

January 2010                                                                                             Page 4
                                                                                                 January 2010

                                                 2010 Outlook:
                              “ From Uncharted to Navigable Waters ”

                                                   Loan Demand vs. Supply

                              (in US$B)                             4Q09                 2009
                              Repayments                            $31.90              $84.90
                              Prime Fund                              0.4                 2.9
                                 Subtotal                            32.2                 87.9

                              BWICs                                   1.8                 5.4
                              New-issue                               18                  38.4
                                 Subtotal                            19.8                 43.8

                              Surplus                              $12.40               $44.10

                                Source: Standard & Poor’s LCD

                            Technical factors remain positive for credit. The primary market, while still
 Technical factors remain   anemic, is gaining momentum and, without significant issuance of new
    positive for credit     structured vehicles to drive demand higher, pricing and structure are
                            expected to stay relatively attractive. Bankruptcies have eased, encouraging
                            bids to the distressed market and ample capital for DIP loans, both
                            resulting in higher recoveries for defaulted loans. Finally, the asset class is
                            being re-priced through amendments, particularly the “Amend-to-Extend”
                            amendments which grant the issuer longer maturities, albeit at higher

                            We would characterize current new issue trends in non-investment grade
                            credit as a cyclical trend, not a secular shift, in favor of investors. In fact,
    Corporate issuers are   corporate issuers are beginning to test the market’s appetite for risk by
                            attempting aggressive transactions to fund dividends and to eliminate recent
    beginning to test the   yield and structure-enhancing features, such as LIBOR floors. In fact, two
    market’s appetite for   recent issuers, Pinnacle Foods and Smurfit-Stone, have launched “covenant-
             risk           lite” loan transactions, a feature that was not expected to resurface in the
                            market this quickly. This type of 2007-like issuance has not been attempted
                            on a broad basis as of this writing.

                            With greater confidence that deals can either be placed in the market or
                            amended favorably, issuers and arrangers will find that financing is available
                            for M&A, a primary driver of leveraged loan activity. And while junk bond
                            spreads arguably have room to fall further, yields are well below 10-year
                            averages of roughly 10%. Concerns about the possibility of rising interest
                            rates will attract more investors to the floating rates of leveraged loans, and
                            the positive feedback loop will continue.

January 2010                                                                                          Page 5
                                                                                                                                                           January 2010

                                                                     2010 Outlook:
                                     “ From Uncharted to Navigable Waters ”

                                                                     High-Yield Bond Spreads and Yields


     While spreads have
    room to fall, yields on

   junk bonds are nearing                  1000
       historical lows

                                               0   Jan-99











                                                                     YTW in bps                   Spread to Worst                         Min Yield

                                          Source: JP Morgan, from Domestic HY data

                              Credit Themes 2010:
     Companies remain         1.   Revenue and earnings momentum: Most corporate issuers are
     cautious in issuing           expressing muted expectations with respect to revenue growth in 2010. It
      positive revenue             is possible that forecasts are somewhat conservative since management
                                   teams perceive little upside in “overpromising” in the current environment.
                                   Within our coverage universe, approximately two-thirds of the companies
                                   experienced year-over-year revenue contraction during the third calendar
                                   quarter of 2009. Only half of the universe reported year-over-year declines
  While two-thirds of our          in EBITDA, showing that companies have aggressively managed expenses
                                   and generally benefited from lower input costs. We believe the 4th quarter
     coverage universe
                                   of 2009 and 1st quarter of 2010 will be important earnings periods against
   experienced revenue             which to measure progress versus the worst of the recession.
  contraction in Q3 2009,
   only half had EBITDA       2.   Stabilizing Credit Metrics: While operating fundamentals will remain
          declines                 challenging, overall credit conditions appear to be stabilizing compared to a
                                   year ago. The following table provides one example of the firming credit
                                   environment, by highlighting the difference in credit upgrade and
                                   downgrade actions by Moody’s, S&P and Fitch within the North American
                                   High Yield universe for all of 2009 as compared to the 4th quarter of 2009.

                                                            Full Year 2009                                             4th Quarter 2009
                                               Downgrades             Upgrades          D/U Ratio           Downgrades           Upgrades            D/U Ratio
                                    S&P          1025                   306                3.3                 127                 113                  1.1
                                    Moodys       1077                   293                3.7                 101                 107                  0.9
                                    Fitch         632                   113                5.6                  58                 82                   0.7

                                                     Source: Bloomberg

January 2010                                                                                                                                                      Page 6
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                                                      2010 Outlook:
                                       “ From Uncharted to Navigable Waters ”
                              1.   L
                              2.   l

                              3.   Liquidity for the upswing?: Many leveraged credit issuers survived the
                                   past 18 months by wringing cash out of working capital as revenues
     The ability to fund           contracted, which reduced the need to access revolver borrowings (and
    growth in a capital-           helped offset the impact of lower earnings on leverage ratios). In addition,
        constrained                companies that needed modifications to credit agreements often agreed to
  environment will be on           reduced revolver commitments as capital providers sought to bolster their
  a company-by-company             own balance sheets. The ability to fund growth, when it occurs, in a
                                   capital-constrained environment will be a company-by-company point of
           basis                   analysis. We are skeptical as to what extent the broad economy can
                                   recover while credit remains constrained.

                              4.   Default Expectations: The reopening of credit markets has improved
                                   the liquidity profile of many high yield issuers and consequently reduced the
   We expect a year-end            likelihood of defaults during 2010. We still expect that 1.25%-1.50% of the
                                   U.S. leveraged loan market will default each quarter this year, leading to a
   default rate in the 5.0-        year-end default rate in the 5.0-6.0% range. For credit investors, the
        6.0% range                 emergence of the distressed credit bid in recent months has been just as
                                   important a development as the resurgence of the broader high yield
                                   market in terms of improving recovery outcomes on defaults.

   The emergence of the            In addition to new high yield loan and bond issuance, the “Amend to
  distressed credit bid and        Extend” (“A to E”) wave that hit the loan market in late 2009 has improved
   “A to E” has improved           near-term default expectations. A to E transactions have resulted in higher
                                   spreads for investors (although we suspect not as high as would have been
   the near-term default           paid in the new issue market) in exchange for longer average life debt and
        expectations               increased covenant flexibility for issuers.

                                   Still, we see many issuers whose total debt burdens and maturity profiles
  Total debt burdens and           remain problematic over the longer term. The recession has taken the
  maturity profiles remain         growth trajectory out of many credits’ base cases, resulting in a likely
   problematic over the            impairment at some level in the capital structure. As a result, we believe
        longer term                default rates will not return to the low pre-2008 levels for several years.

                              Navigating the Cross-currents of Fundamentals versus
                              Global Liquidity:

                                   There is no doubt the world financial system narrowly averted a total
                                   meltdown following the events of September 2008. Massive injections of
                                   liquidity and government programs to support a wide range of institutions
                                   and markets helped contain the damage. Fed Chairman Bernanke’s
                                   understanding of the causes of the Great Depression and the mistakes
                                   made then allowed him, Treasury Secretary Paulson, and then-NY Fed
                                   President Geithner to respond forcefully with a “whatever it takes”

January 2010                                                                                              Page 7
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                                                    2010 Outlook:
                                   “ From Uncharted to Navigable Waters ”

    Government liquidity         approach to ensure the financial system continued to operate. Chairman
                                 Bernanke and Treasury Secretary Geithner maintained this pragmatic
    injections helped to
                                 approach in 2009.
  stabilize the markets in
   2009, contributing to         The massive injections of global liquidity helped stabilize the markets and
     the markets stellar         contributed to stellar performance in 2009. Like many market participants,
        performance              we saw value at the depressed levels of March 2009. We would not have
                                 predicted equities would have rebounded quickly from the lows, or that
                                 certain fixed income assets would achieve 50% returns. But the story is far
                                 from over and there will be many twists in the road.

                                 As we enter 2010, we are mindful of certain competing themes that are still
                                 in play. Here are some of the questions the market will sort out over the
                                 next few months, and to which we will pay close attention:

                             •   There remains too much corporate and consumer leverage in the global
                                 system, which will require time to reduce. Whether it is commercial real
   Leverage remains high         estate still on bank balance sheets or in CMBS, or consumer debt far in
                                 excess of what is prudent, how these sectors continue to reduce leverage
    across various asset         will drive economic performance. At this point, we believe the process will
          classes                continue to be somewhat orderly. However, we will be alert to potential
                                 problems, whether they are systemic or individual credit/sector (i.e. mark-
                                 to-market/valuation driven).

                             •   Fiscal and policy stimulus will fade in 2010, but housing and financial
                                 weakness will not be as large a negative as in 2009. The stock market
                                 recovery has helped household wealth and consumer sentiment. A double
                                 dip recession and spike in unemployment would have negative implications
                                 for credit and performance.

                             •   Consumer credit, impacted by unemployment and continued housing
                                 weakness, will be a drag on growth for 2010. If job numbers show some
                                 consistent gains, growth in consumer spending might follow as confidence

    Inflation hawks are      •   The world is awash in cheap money and the inflation hawks are waiting to
   waiting to see how the        see how the Fed and other central banks respond in draining central bank
   Fed and other central         liquidity. In our opinion, Bernanke will err on the side of caution; thus, we
                                 don’t see inflation becoming an issue until much later this year, if at all in
     banks respond in            2010. A recent Bernanke comment in November 2009 suggested no hikes
   draining central bank         for an “extended period”.
                             •   At the same time, the Fed has signaled to banks that they need to hedge
                                 against higher rates, which will happen eventually. The Fed has even
                                 experimented with reverse repurchase open market operations to prepare

January 2010                                                                                             Page 8
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                                                      2010 Outlook:
                                    “ From Uncharted to Navigable Waters ”

    The Fed has provided      •   for the day they have to act to drain excess reserves. We believe that day
  mixed messages towards          is not imminent, and that the Fed and Treasury want to help banks repair
     the timing of rate           their balance sheets with the “carry trade” for as long as possible. A steep
                                  yield curve is a positive for banks as the net interest margin improves. In
   increases, however we          our opinion, the Fed will not tighten until it is forced to respond to tangible
  do not believe this to be       signs of higher inflation expectations. We think it is likely that some of the
         imminent                 decision makers at the table still consider deflation more of a threat to the

                              •   In this environment, will there be a crowding-out effect from the estimated
                                  net US Treasury issuance of $1.4 Trillion? How will this affect domestic
                                  corporate issuance, not to mention the US dollar? We expect the supply
                                  of corporate credit issuance to be absorbed by the excess liquidity now
                                  held in cash or cash substitutes, which will be deployed out the curve in
                                  risk assets. This should support performance since there are so few other
                                  spread alternatives.

                              •   Net residential mortgage issuance should remain fairly low at an estimated
                                  net $360B – not surprising given consumer credit availability, bank
                                  underwriting standards and the end of the GSE government purchase
                                  program in March.

    85% of all loans are      •   A heavy refinancing calendar for US corporate and high-yield loans in 2012-
  scheduled to mature in          2014 (85% of all loans are scheduled to mature in ’12-’14) should support
                                  opportunistic refunding and investment. Our 2010 return forecast is in the
         2012-14                  7-8% range for performing US leveraged loans.

                              •   Understanding the investment limitations of the CLO portfolios (which
                                  control roughly half of the leveraged loan term loans) presents attractive
                                  investment opportunities, e.g. select Triple-C rated assets with solid
                                  collateral packages, while toxic to CLO structures, yield outsized returns
                                  given the expected recovery.

                              •   Consensus default forecasts have dropped dramatically – from 10-11% in
    Although defaults are         2009 to an estimated 4-6% in 2010. We see a possible dip and then rise in
      projected to drop           defaults as central bank liquidity is withdrawn from the system (probably a
  dramatically in 2010, we        2011-12 event). Some companies that struggled through 2009 will “give up
   see a possible dip and         the ghost” in 2010, especially if we have a double dip or slower than
                                  expected growth.
   then rise in defaults as
  central bank liquidity is   •   We are wary of sectors and companies which have been unable to reduce
     withdrawn from the           leverage sufficiently to an extent that they will be negatively impacted by a
           system                 2-3% growth economy and the inevitable rise in rates later this year or in

January 2010                                                                                               Page 9
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                                                      2010 Outlook:
                                     “ From Uncharted to Navigable Waters ”

     We are cautious how       •   Finally, we are cautious how state governments and local municipalities will
    state governments and          fare in 2010 and beyond. Revenues will be under stress as taxpayers (both
                                   individuals and businesses) recover from the “Great Recession”.
   local municipalities will
  fare in 2010 and beyond          Corporate fundamentals have improved as fixed costs have been slashed
                                   and much existing debt has been refinanced and extended. In contrast, the
                                   government, through its aggressive and necessary stimulus, has a much
                                   worse credit profile than ever before seen. Ultimately, the government can
                                   print more money, and the underlying fundamentals in the economy
                                   mitigate the inflationary risks of such actions. It is this interplay between
                                   the two that will determine opportunities for performance and which we
                                   will continue to follow.

January 2010                                                                                             Page 10
                                                                                                                                        January 2010

                                                                          2010 Outlook:
                                                      “ From Uncharted to Navigable Waters ”

Contributors:                                Disclaimer:
Barry Love
Head of Research and Portfolio Management        This publication has been prepared on behalf of Gulf Stream Asset Management, LLC (“Gulf
BLove@gulfstreammgmt.com                         Stream”) solely for informational purposes. It is not investment advice or an offer or
704.552.5042                                     solicitation for the purchase or sale of any financial instrument, nor does it constitute an
                                                 endorsement with respect to any investment strategy or financial instrument. Certain
                                                 information contained herein has been obtained from third party sources and has not been
                                                 independently verified by Gulf Stream. Gulf Stream makes no representations as to the
Steve Riddell
                                                 accuracy or the completeness of any of the information contained herein. Neither Gulf
Portfolio Manager and Senior
                                                 Stream nor any other party involved in or related to compiling, computing or creating the data
Research Analyst
                                                 contained herein makes any express or implied warranties or representations with respect to
                                                 such data (or the results to be obtained by the use thereof), and all such parties hereby
                                                 expressly disclaim all warranties of originality, accuracy, completeness, merchantability or
                                                 fitness for a particular purpose with respect to any of such data. The assumptions used in
                                                 making forecasts rely on a number of economic and financial variables. These variables are
Mark Abrahm
                                                 subject to change and may affect the likely outcome of the forecasts. Statements concerning
Head Trader and Market Strategist
                                                 financial market trends are based on then-current market conditions, which will fluctuate. Any
                                                 statements of opinion constitute only current opinions of Gulf Stream, any such statements (as
                                                 well as any information contained herein) are subject to change and Gulf Stream does not
                                                 undertake to revise or update any such statements or information in any way. Gulf Stream
                                                 and any of its officers or employees may, to the extent permitted by law, have a position or
John Carlin                                      otherwise be interested in any transactions, in any investments (including derivatives) referred
Product Development and Senior                   to in this publication. Neither Gulf Stream nor any of its officers or employees accepts any
Research Analyst                                 liability for any direct or consequential loss arising from any use of this publication or its
JCarlin@gulfstreammgmt.com                       contents. Copyright and database rights protection exists in this publication and it may not be
704..552.3132                                    reproduced, distributed or published by any person for any purpose without the prior express
                                                 consent of Gulf Stream. All rights are reserved. Any investments referred to herein may
                                                 involve significant risk, are not necessarily available in all jurisdictions, may be illiquid and may
Jim Anderson                                     not be suitable for all investors. Past performance is not indicative of future results. No
Head of Risk Management, Investor                investment strategy or risk management technique can guarantee return or eliminate risk in
Reporting and Compliance                         any market environment. Only investors with sufficient knowledge and experience in financial
JAnderson@gulfstreammgmt.com                     matters to evaluate the merits and risks should consider an investment in any issuer or market
704. 552.1058                                    discussed herein. Additional information is available on request. At the date hereof, Gulf
                                                 Stream or its affiliates may be, with respect to the securities mentioned herein, buying, selling,
                                                 or holding significant long or short positions in such securities, providing services to the issuer
Taylor Agisim                                    of such securities, represented on the board of the issuer of such securities. The information
Associate                                        is not intended and should not be construed as legal or tax advice. Investors should
TAgisim@gulfstreammgmt.com                       independently investigate any investment strategy or financial instrument, and should consult
212.338.9917                                     with qualified investment, legal, and tax professionals before making any investment.

                               North Carolina:                                                      New York:
                                  Mark Mahoney                                                   Mark Zusy
                                    President                                Chief Financial Officer/Head of New York Office
                               The Rotunda Building                                        The Helmsley Building
                               4201 Congress Street                                          230 Park Avenue
                                     Suite 475                                                    Suite 3320
                                   Charlotte, NC                                                New York, NY
                                     28209                                                         10021
                                  704.552.7711                                                 212.338.9917

January 2010                                                                                                                                Page 11

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