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HB Capital Management, Inc. (HB), the Advisor, is incorporated under the laws of the state of Virginia, and its principal, Howard A. Bernstein, first registered with the Commodity Futures Trading Commission under the Commodity Exchange Act as a Commodity Trading Advisor (CTA) in January, 1989. The firm named was changed to HB Capital Management, Inc. in October, 1993. From October, 1993 to June, 1997 HB was a Commodity Pool Operator. From September, 1998 to December, 2001 HB was a Registered Investment Advisor. HB withdrew its registration as a CTA in April, 2002 and reinstated its registration as a CTA on January 1, 2008 and is a member in good standing of the National Futures Association.

Howard A. Bernstein is the chief trader and sole principal of HB Capital Management, Inc. Mr. Bernstein first achieved recognition by finishing in the top ten of the US Investing Championship, Futures Division in 1990, 1991 and 1992, highlighted by a 2nd place finish in 1991. Other performance awards include: Managed Derivatives Magazine, high performance award, 1994; Stark Research Report ranked #3 for previous 4 years, 1994; CTA Research Corporation ranked #2 for risk-adjusted return, 1995; Managed Account Reports, Quarterly Performance Reports, ranked #6 for performance and #8 for risk-adjusted return over previous 5 years, 1996; Moniresearch newsletter ranked #1 for performance over previous 3 years, March 2001.

Mr. Bernstein has appeared in publications such as Barron’s, Investor’s Business Daily, Futures Magazine, Wall Street Transcripts, Financial Planning Magazine,  America’s Best Timers, Managed Account Reports, Society of Market Technicians Newsletter, Formula Research Newsletter and Technical Traders Bulletin.

Trading Program Description
This program utilizes the principal’s 20+ years experience trading in the futures markets in order to develop a multi-strategy and multi-market approach to trading both commodity futures and options on futures trading.

Commodity option selling - The program consists of selling or "writing" options (puts and calls) on futures contracts in the crude oil, coffee, soybeans, silver, natural gas and corn markets, among others. The program may also, from time to time, purchase options and may employ the use of hedged strategies such as option spreads, strangles, straddles, or may purchase or sell futures to offset an open option position.

The implementation of this trading program depends on both technical and fundamental considerations. Technical analysis involves the study of charted prices, volume and momentum to determine the future course of prices. Other analysis may also be performed on the prices of various options, both in absolute terms in relation to their historic price level, and in relative terms comparing the prices of puts to the prices of similar calls. Implied and historical volatility of both the option and its underlying commodity are also studied. Fundamental considerations, utilized on a commodity by commodity basis, include supply and demand, seasonal movements as well as business and economic factors, governmental policies, weather, and other worldwide events, which can influence the commodity markets.

The predominate strategy used in the commodity option program is to sell medium dated “out-ofthe- money” options (those expiring in 1-3 months). "Out-of- the- money" puts have strike prices below the current price of the underlying futures contract, and "out-of-the- money" calls have strike prices above the current price.

Profits are derived when the price of the options that have been written (sold) declines such that the options can be purchased for amounts less than the price at which those options were initially sold. Profits also are realized when options expire worthless, providing full profit on the option premium sold (after
commission and other fees).

The profitability of a trading program consisting of selling options on a futures contract depends upon the subsequent price movement of the underlying contract. For example, if the program writes puts on a commodity contract, and the puts are not bought back prior to expiration, the strategy will be profitable if the commodity contract is above the strike price of the put when the put expires. If the price of the underlying contract is below the strike price of the put when the put expires, the strategy may potentially produce a loss.

Seasonal and spread trading - HB seek to profit from seasonal patterns inherent in various commodity markets. The trades taken may be outright long (buy) and short (sell) positions or spread trades between two similar commodities. Seasonal trading may also employ the use of buying and/or selling options.

Stock Market timing – HB has developed a proprietary program for trading the stock market. HB may take a long position when a buy signal is generated for the stock market and may take a short position when a sell signal is generated.

Trend following - One technical system developed by HB is designed to identify trending markets. When such trends are identified, positions may be taken in the markets based on computer generated signals.

In order to attempt to achieve the goal of steady profits with minimal loss of equity (drawdown), these systems are blended together in a portfolio. In this regard, HB may trade in 10-15 commodities. Of course, no assurances can be made that any trading strategies will produce profitable results.

HB believes that the development of a commodity trading strategy is a continual process. As a result of further analysis and research into the performance of HB's methods, changes have been made from time to time in the specific manner in which these trading methods evaluate price movements in various commodities, and it is likely that similar revisions will be made in the future.