HB Capital Management, Inc.

(Diversified)

Fund Investment Objectives

The program uses a number of different options and futures strategies. The option strategies include a variety of different spreads such as verticals, calendars, ratios, strangles, and straddles amongst others. The program will also outright sell or buy an option in certain situations. In addition, the program may purchase or sell futures to offset an open option position. The program trades options and futures contracts in the crude oil, coffee, soybean, gold, natural gas and corn markets, among others. 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. A secondary strategy seeks 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. A third strategy that HB Capital Management has developed is a proprietary program for trading the stock market. We 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.