The intent of our arbitrage strategy is to produce consistent, uncorrelated returns with low volatility. We attempt to accomplish this by capitalizing on our research staff's understanding of announced mergers and acquisitions. Particular emphasis is placed on those deals in which we feel we have an incremental research advantage. Profits are derived by capturing the spread between the price the acquiring company has committed to pay and the current market price of the acquisition target. The Arbitrage Strategy has three formats, the original proprietary capital format with a target gross exposure of approximately 100% and the investor oriented format, with target gross exposure of approximately 200% (Merger Arbitrage II) and 300% (Merger Arbitrage III).