Event Driven Investing Made Easy

1. Event Driven Investing Made Easy THIS DOCUMENT SHALL NOT CONSTITUTE AN OFFER TO SELL INTERESTS IN ARBITROPTION CAPITAL MANAGEMENT, LLC OR A SOLICITATION OF AN OFFER TO PURCHASE SUCH INTERESTS. ANY SUCH OFFER SHALL ONLY BE MADE PURSUANT TO A DEFINITIVE PRIVATE PLACEMENT MEMORANDUM. THE TERMS DESCRIBED HEREIN ARE SUBJECT TO CHANGE.

2. Definition • First, I need to clarify what I mean when I say event-driven investing. This is not the sort of thing that’s based on an email you get from someone who wants you to invest in under-developed Australian real estate or a Nigerian bank account. When I say event-driven investing, I mean making a specific investment based on an expectation that value will be created by a publicly disclosed corporate event. Examples of these events could include acquisitions, litigation outcomes, mergers, regulatory decisions, recapitalizations, restructuring, special dividends, or spin-offs. Please note that each of these types of events is, first, disclosed in a public announcement like a press release, second, • attached to a specific process whose duration can be estimated and, third, a creator of value which can be estimated and targeted. • These events specifically do not include trading based on insider information or making an investment based on a fundamental expectation that a stock is underpriced relative to some trend that could impact it at an unknown future point. If, for example, you believed that the Japanese nuclear disaster was going to have an impact on the use of nuclear power in Germany, that trend would not meet the threshhold of being an event-driven investment because it’s still very uncertain how long it would take for that • impact to be felt and it’s difficult to estimate the magnitude of the impact. • Please move forward to slide 3, Contrasting With Other Investing Strategies Event-Driven Investing • Characteristics • Publicly disclosed • Estimable timeframe • Estimable terminal value • Does NOT include: • Insider trading • Speculation based on macro trends Press [ENTER] to Advance

3. Contrasting Event Driven With Other Investing Strategies This is a complicated chart. In the interest of providing the most useful information, though, it had to be done this way. Suffice it to say, this chart shows the relative performance of six distinct investment strategies since the start of 2006. As you can see, the dark blue line represents the Global Macro investment strategy, which profits from accurately predicting the effects of political trends and global macroeconomic events and has been the strongest performer. The pink line represents the Dedicated Short Bias strategy, which relies on detailed individual company research to identify companies with weak cash flow and has been the weakest strategy since 2006. If you’re curious, you can find a detailed description of each strategy on the last slide of this presentation. If you click to advance the presentation, we’ll make some room on the graph and bring in a black line that represents the historical performance of the Event-Driven strategy. Not as strong as Global Macro, but Event-Driven also shows less volatility and substantial outperformance relative to the other investment strategies presented. One more click to advance the presentation will bring out our last set of data for this chart. This newest line shows the performance of the S&P 500 over the same timeframe. The S&P 500 showed tremendously greater volatility. Just for reference, volatility is not inherently bad, but it can generate ulcers for folks who monitor their investment performance on a monthly or daily basis. Please move forward to slide 4, Risk Tolerance and Your Investment Horizon Press [ENTER] to Advance

4. Risk Tolerance & Investment Horizon When you consider whether Event-driven Investing is appropriate for you, you need to first consider your risk tolerance and investment needs. If you click to advance the presentation, you’ll bring in a pie chart that shows the distribution of historical annual returns of an event-driven investing strategy. As you can see, annual returns of an event-driven strategy have exceeded 10% in slightly under two-thirds of the 12 month periods I’ve reviewed. Returns have been between -10% and 10% in 18% of the 12 month periods, and been below negative 10% in 18% of the 12 month periods. By multiplying performance against probability, history indicates that the probability-adjusted return of the event-driven investing strategy is 7.6% in any given year. For purposes of comparison, the 10 year US Treasury note currently pays 3.2% per year. Of course, historical performance is not an accurate indicator of future performance …so the whole point is interesting but unreliable. However, you could try thinking about your risk tolerance by imagining two separate investments. Click to advance the presentation and bring in a table of two imaginary investments. Investment A provides an average annual return of 3.2% with minimal risk of loss of principal. Investment B provides an average annual return of 7.6% but carries a potential loss of principal of 15% or more in a given year. If you could split your money between Investment A and Investment B to meet your goals, what would you would choose to do? If you’d choose to put 100% of your money in Investment A, Event-Driven Investing is probably not a suitable investment. If, on the other hand, you’re interested in a mix of Investment A and Investment B, there could be a role for event-driven investing in your portfolio. Fortunately, we also have a number of tools that can be used to reduce risk within a portfolio. First, diversification is a means of reducing the risk from any one security, asset class, industry, geography, or demographic trend. In reality, you’re not restricted to choosing just between Investment A and Investment B – instead you have choices that range from foreign small-call to US large cap, with fixed income securities, commodities, real estate, and diverse trading strategies thrown in for good measure. By maintaining a diversified portfolio, and rebalancing once a year to maintain diversification, an investor can mitigate their individual risk exposures. Moving on, Investment Horizon is a fancy term for the point in time when you’ll need to use your investments for income. The common wisdom is that an investor should shift from higher volatility to lower volatility as they approach their investment horizon. One should also bear in mind John Maynard Keynes’ wisdom, however, which is that in the long run, we’re all dead. On that happy note, I’d observe that event-driven investing, with a volatility that falls somewhere between that of the general equities market and that of investment grade fixed income securities, is probably not suitable to represent more than 10% of any individual’s investment portfolio. Someone who is retired or close to retiring and considering an investment in an event-driven strategy would probably do better to limit their investment to no more than 5% of their total portfolio. Please move forward to slide 5, Correlation in Your Portfolio. • Risk Tolerance • Outperformance vs. Downturn • Tools: • Diversification • Rebalancing • Investment Horizon • Point at which investments are needed for income • Keynes Press [ENTER] to Advance

5. Correlation Within Your Portfolio One of the risks to bear in mind while setting up a diversified portfolio is the possibility that it’s not as diversified as it seems. Correlation is what happens when diverse asset classes, such as equities and gold, rise and fall together. If you think back to the chart on slide 3, you can see correlation when you look at the historical performances of emerging markets and long/short equity, even though these are two strategies that have little in common. When you think about the investment opportunities that event-driven investing focuses on, it’s easy to see why there isn’t substantial correlation with the general market performance. Events that create value, such as acquisitions, mergers, and recapitalizations, occur in good markets and bad. So long as there’s change, there’s an opportunity for an event-driven investment strategy to earn a positive return. Please move forward to slide 6, Adding an Event-Driven Component • The Opposite of Diversity • Harmful when it occurs unexpectedly • Event-Driven Investing is uncorrelated with general market performance Press [ENTER] to Advance

6. Adding An Event-Driven Component An investor who’d like to gain an exposure to event-driven investing has two basic avenues to choose from – private securities and public securities. Private securities include things like limited partnerships in investment funds, also known as hedge funds. Generally, in order to gain access to these investment funds an investor needs to be accredited, which means that they have more than $1 million in liquid assets, or that they and their spouse earned income of more than $250,000 in each of the previous 2 years and expect to earn more than $250,000 in the current year. One thing to consider is that many investment funds use limited partnership agreements that require investors to commit funds and not withdraw them for a period of time that can range from as little as three months to as much as three years. Anyone purchasing a limited partnership in an investment fund should have an attorney review the agreement before signing. Another disadvantage of using private securities to gain access to an event-driven investing strategy is that the investments are not transparent. Because valuation reports are produced on a quarterly basis, and will include dollar amounts but not specific securities, it can be difficult to know when a portfolio manager’s investment style has drifted, or whether position risk limits are being followed. A final point about private securities is the structure of the fees. An investment fund usually charges clients a nominal management fee of 2% of managed assets per year to cover the fund’s operating expenses. In addition, most investment funds charge clients an incentive fee of 20% of profits that are generated. If an investment fund is managing $1 million for you, a 2% management fee will cost you $20,000 per year. If that same fund achieves a 10% annual return, a 20% incentive fee will cost you an additional $20,000. In effect, the 10% annual return would be 6% after fees. If you are interested in researching investment funds, a good place to start is Morningstar.com. Premium members of Morningstar get access to a database of information about thousands of investment funds. To the right, you can see a snapshot of Morningstar’s hedge fund information. Morningstar’s database can be sorted by investment strategy, including funds that make investments based on corporate events. Please move forward to slide 7, the continuation of Adding an Event-Driven Component. • Private Securities • Must be an accredited investor • Investments may be “locked up” • Not transparent • Management Fees and Incentive Fees Press [ENTER] to Advance

7. Adding An Event-Driven Component (cont.) As I mentioned, an investor who’d like to gain an exposure to event-driven investing has two basic avenues to choose from – private securities and public securities. There is much more information readily available about public securities, which include exchange-traded funds, mutual funds, and registered investment advisors. Exchange traded funds are a product that was introduced relatively recently. The three ETFs that are profiled here all make investments in companies that are experiencing mergers or acquisitions, so as to profit from the value that will be created by that event. One of the advantages of ETFs, relative to the other kinds of public securities, is that they can be traded in the same way as stocks. Whereas mutual funds can only be traded once a day, based on their valuation after the financial markets close that day, an ETF could be bought or sold at any point while the financial markets are open. In general, by purchasing shares in a mutual fund an investor is hiring the mutual fund to manage a portion of the investor’s portfolio. It’s interesting to note that the investment management of these exchange traded funds and mutual funds is startlingly dissimilar. In point of fact, these mutual funds’ prospectuses indicate that they may make investments in exchange-traded funds in an effort to achieve results that are similar to the Event-Driven performance shown on slide 3. That fact can only make one wonder … if you choose to invest in one of these mutual funds, with higher fees than what you’d get from an exchange-traded fund, are you getting what you pay for? If you click to advance the presentation, you’ll see a chart that shows that, in fact, the investment option that’s provided the best performance of the ETFs and mutual funds is the Rydex mutual fund. Performance data on this fund only goes as far back as July of 2010, but in the time since it was launched the Rydex Event Driven and Distressed Strategies mutual fund has gained nearly 12%, after including dividends. Of course, there’s an important investment option that’s missing from this chart … please click again to bring in a chart that compares ArbitrOption’s performance. Since the start of January, 2010 ArbitrOption Capital Management has produced a return of just under 70% by making investments in regulatory decisions, mergers, acquisitions, special dividends, recapitalizations, and restructuring events. Performance isn’t everything – as you can see, the strategy is volatile and an investor needs to be prepared for the possibility that the value of an account could fall substantially from one month to the next. But I hope that this information will be useful for you as you consider whether you’d like to use one of these investment vehicles to add an event-driven strategy to your investment portfolio. The next two slides contain more detail on the different strategies presented in the chart on slide 3, as well as a disclaimer about the performance of ArbitrOption that’s shown on this slide. Please review them at your convenience. In addition, please feel free to send any questions about the material in this presentation to Contact@ArbitrOption.com. Thank you. • Public Securities • Exchange Traded Funds (“ETF”) • Credit Suisse Merger Arbitrage Fund (CSMA) • IndexIQ Merger Arbitrage Fund (MNA) • Quaker Event Arbitrage Fund (QEAAX) • Mutual Funds • Rydex Event Driven and Distressed Strategies (RYDSX) • The Arbitrage Fund (ARBFX) • Diversified Arbitrage Fund (ADANX) • Registered Investment Advisors • ArbitrOption Capital Management Press [ENTER] to Advance

8. Strategy Descriptions • Global macrofunds typically focus on identifying extreme price valuations and leverage is often applied on the anticipated price movements in equity, currency, interest rate and commodity markets. Managers typically employ a top-down global approach to concentrate on forecasting how political trends and global macroeconomic events affect the valuation of financial instruments. Profits can be made by correctly anticipating price movements in global markets and having the flexibility to use a broad investment mandate, with the ability to hold positions in practically any market with any instrument. These approaches may be systematic trend following models or discretionary.  • Emerging markets funds typically invest in currencies, debt instruments, equities and other instruments of countries with “emerging” or developing markets (typically measured by GDP per capita). Such countries are considered to be in a transitional phase between developing and developed status. • Long/short equity funds typically invest in both long and short sides of equity markets, generally focusing on diversifying or hedging across particular sectors, regions or market capitalizations. Managers typically have the flexibility to shift from value to growth; small to medium to large capitalization stocks; and net long to net short. Managers can also trade equity futures and options as well as equity related securities and debt or build portfolios that are more concentrated than traditional long-only equity funds.  • Fixed income arbitrage funds typically attempt to generate profits by exploiting inefficiencies and price anomalies between related fixed income securities. Funds often seek to limit volatility by hedging out exposure to the market and interest rate risk. Strategies may include leveraging long and short positions in similar fixed income securities that are related either mathematically or economically. The sector includes credit yield curve relative value trading involving interest rate swaps, government securities and futures; volatility trading involving options; and mortgage-backed securities arbitrage (the mortgage-backed market is primarily U.S.-based and over-the-counter).  • Equity market neutral funds typically take both long and short positions in stocks while seeking to reduce exposure to the systematic risk of the market (i.e., a beta of zero is desired). Equity market neutral funds typically seek to exploit investment opportunities unique to a specific group of stocks, while maintaining a neutral exposure to broad groups of stocks defined for example by sector, industry, market capitalization, country, or region. The index has a number of subsectors including statistical arbitrage, quantitative long/short, fundamental long/short and index arbitrage. Managers often apply leverage to enhance returns.  • Dedicated short bias funds typically take more short positions than long positions and earn returns by maintaining net short exposure in long and short equities. Detailed individual company research typically forms the CoreHedge alpha generation driver of dedicated short bias managers, and a focus on companies with weak cash flow generation is common. To affect the short sale, the manager typically borrows the stock from a counterparty and sells it in the market. Short positions are sometimes implemented by selling forward. Risk management often consists of offsetting long positions and stop-loss strategies. 

9. Disclaimer The chart on slide 7 reflects the performance of the ArbitrOption strategy in a proprietary trading account.  The funds in that account are not subject to the trading restrictions of retirement assets.  The funds in that account receive 100% leverage, but results are calculated on an "equity x 2" basis  (for performance calculation, the leverage is treated as actual cash in the account) to allow for in-kind comparison with an unlevered account.  All figures are ex-trading costs, net of a hypothetical 2% annual management fee (deducted monthly), and unaudited.