QUARTERLYINVESTMENTREVIEW

THIRDQUARTER2010

Crestline Capital, LLCCC

USLargeCompaniesStocks

USSmallCompanyStocks

USREITStocks

Interna9onalDevelopedStocks

USBondMarket

USTreasuryOneMonthTreasuryBills

+11.29% +11.29% +13.22% +16.14% +2.48% +0.04%

Marketsegment(Indexrepresenta9on)asfollows:USLargeCompanyStocks(S&P500Index);USSmallCompanyStocks(Russell2000Index),USValueStocks(Russell1000ValueIndex).USRealEstateMarket(DowJonesUSSelectREITIndex),Interna9onalDeveloped(MSCIWorldexUSAIndex(netdiv.)),EmergingMarkets(MSCIEmergingMarketsIndex(grossdiv.)),USBondMarket(BarclaysCapitalUSAggregateBondIndex),andTreasury(One‐MonthUSTreasuryBills).TheS&PdataareprovidedbyStandard&Poor'sIndexServicesGroup.Russelldatacopyright©RussellInvestmentGroup1995‐2010,all rights reserved.MSCIdatacopyrightMSCI2010,all rights reserved.DowJonesdata (formerlyDowJonesWilshire)providedbyDowJones Indexes.BarclaysCapitaldataprovidedbyBarclaysBankPLC.USlong‐termbonds,bills,andinfla9ondata©Stocks,Bonds,Bills,andInfla9onYearbook™,IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG. IbbotsonandRexA.Sinquefield). Indexperformancedoesnotreflecttheexpensesassociatedwiththemanagementofanactualporfolio. Pastperformanceisnotaguaranteeoffutureresults.

MarketsUpdate:AQuarterinReviewThirdQuarter2010

EmergingMarketsStocks

+18.16%

1

BONDSSTOCKS

USValueStocks

+10.13%

MarketsUpdate:AQuarterinReviewThirdQuarter2010

2

•   TheUSequitymarket ralliedstrongly in the thirdquarter, reversing thedismalperformanceof thesecondquarter.ThebroadUSmarketgainedover11%inthequarter,withmostassetclassesdeliveringdouble‐digitposi9vereturns.

•   Performanceinotherdevelopedmarketswasgenerallygood,especiallyinScandinaviaandAustralia.However,therewasmuchdispersioninperformanceattheindividualcountrylevel.Ireland,whichcon9nuestofaceseverefiscalandfinancialproblems,and Japanhad smallposi9ve returns,while theScandinavian countriesall hadquarterly returns inexcessof25%.TheUSdollarlostgroundagainstmostmajorcurrencies,especiallytheeuroandtheAustraliandollar,whichgreatlyhelpedthedollar‐denominatedreturnsofdevelopedmarketequi9es.

•   Emergingmarketshadevenbelerperformancethandevelopedmarkets,andwerethetop‐performingassetclassfortheperiod.Asinthecaseofdevelopedmarkets,therewasmuchdispersionintheperformanceofdifferentemergingmarkets,althoughmostemergingmarketsmanagedtoendthequarterwithdouble‐digit returns.TheUSdollaralso lostgroundagainstthemainemergingmarketcurrenciesinthethirdquarter,whichcontributedposi9velytothedollar‐denominatedreturnsofemergingmarketequi9es.

•   Inthethirdquarter,valuestocksunderperformedgrowthstocksacrossallmarketcapitaliza9onsegmentsintheUSandinotherdevelopedmarkets.Inemergingmarkets,ontheotherhand,valuestockshadmixedperformancerela9vetogrowthstocks.Smallcapvaluestocksoutperformedsmallcapgrowthstocks,whilelargecapvaluestocksunderperformedlargecapgrowthstocks.

•   Alongthemarketcapitaliza9ondimension,smallcapsnarrowlytrailed largecaps intheUS. Inotherdevelopedmarketsandinemergingmarkets,ontheotherhand,smallcapsgreatlyoutperformedlargecapsinthequarter.

•   Notwithstandingthecon9nuedweaknessinthecommercialandresiden9alrealestatemarkets,realestatesecuri9eshadexcellentreturnsinthethirdquarterandverygoodperformancerela9vetootherassetclasses.

•   Fixed income securi9es had good returns in the third quarter. Declining long‐term rates rewarded investorswhowereexposedtotermrisk.Intermediategovernmentsecuri9esandinfla9on‐protectedsecuri9esdidpar9cularlywell.

TimelineofEvents:AQuarterinReviewThirdQuarter2010

AgriculturalBankofChinaraises$19.2billion,inoneoftheworld’slargesteverini9alpublicofferings.

HundredsoffireseruptinseveralregionsacrossRussia,leadingtohazardouscondi9onsinMoscowandareduc9oninwheatavailableforexport.

Jul15 Aug31 Sep15

TheUSCongresspassestheFinancialReformBill,themostsweepingchangestofinancialregula9onsincetheGreatDepression.

ChinaovertakesJapantobecometheworld’ssecond‐largesteconomy.

ThelastUScombatunitswithdrawfromIraq.

Aug15

FloodsinPakistancausewidedevasta9on,withover17millionpeopleaffectedand5millionpeopleleshomeless.

Jul31

SouthAfricahoststheFIFAsoccerWorldCup,markingthecon9nent’sfirst9metoentertaintheworld’slargestspor9ngevent.

GoldmanSachssellescivilfraudchargesbroughtbytheSEC,agreeingtopayafine.

FivemonthsaserarigexplosionintheGulfofMexico,BPpermanentlysealstheleakingoilwell.

AIGagreedwiththeTreasuryandtheFederalReserveBankofNewYorkonaplantoreturntheinsurancegrouptofullprivateownershipoverthenexttwoyears,adrama9caccelera9onoftheprevious9metable.

3

TheTeaPartymovementgainsnotorietyinseveralprimaryelec9onsacrossthecountry.

Annualized(%)

Index1YearEnding

9/30/20103YearsEnding

9/30/20105YearsEnding

9/30/201010YearsEnding

9/30/201020YearsEnding

9/30/2010SinceIncep9on(Incep9ondate)

USLargeCompanyStocksS&P500Index 10.16 ‐7.16 0.64 ‐0.43 9.05 9.77

(01/1926)

USSmallCapStocksRussell2000Index 13.34 ‐4.29 1.60 3.99 10.28 11.29

(01/1979)

USValueStocksRussell1000ValueIndex 8.91 ‐9.38 ‐0.48 2.59 9.97 11.93

(01/1979)

USRealEstateInvestmentTrustStocksDowJonesUSSelectREITIndex 30.14 ‐6.98 1.36 10.12 11.23 12.39

(01/1978)

Interna9onalStocksMSCIWorldexUSAIndex 4.14 ‐8.96 2.42 2.91 6.30 9.40

(01/1970)

MSCIEmergingMarketsIndex(grossdiv.) 20.54 ‐1.20 13.08 13.77 11.60 13.87(01/1988)

BondsSBBILong‐TermCorporateBonds 13.33 9.80 6.82 8.55 8.65 5.96

(01/1926)

SBBIOne‐MonthUSTreasuryBills 0.09 0.93 2.43 2.35 3.55 3.63(01/1926)

BeyondtheQuarter:SurveyofLongTermPerformanceAsofSeptember30,2010

4

TheS&PdataareprovidedbyStandard&Poor'sIndexServicesGroup.Russelldatacopyright©RussellInvestmentGroup1995‐2010,allrightsreserved.MSCIdatacopyrightMSCI2010,allrightsreserved.DowJonesdata(formerlyDowJonesWilshire)providedbyDowJonesIndexes.USlong‐termbonds,bills,andinfla9ondata©Stocks,Bonds,Bills,andInfla9onYearbook™,IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinquefield). Indexesarenotavailablefordirect investment. Indexperformancedoesnotreflecttheexpensesassociatedwiththemanagementofanactualporfolio.Pastperformanceisnotaguaranteeoffutureresults.

ChangeinValueof$10,000InvestedinVariousMarketsOctober1,2009–September30,2010

5

CHANGEINVALUEOF$1

AssetClass Index 1Year 5Years 10Years 20YearsUSLargeCompanyStocks S&P500 $1.10 $1.03 $0.96 $5.66USSmallCapStocks Russell2000 $1.13 $1.08 $1.48 $7.07USValueStocks Russell1000Value $1.09 $0.98 $1.29 $6.69USRealEstateInvestmentTrustStocks DowJonesUSSelectREIT $1.30 $1.07 $2.62 $8.41Interna9onalDevelopedStocks MSCIWorldexUSA $1.04 $1.13 $1.33 $3.39EmergingMarketStocks MSCIEmergingMarkets(grossdiv.) $1.21 $1.85 $3.63 $8.99FixedIncomeCorporateBonds Long‐TermCorporateBonds $1.13 $1.39 $2.27 $5.25ShortTermGovernmentBonds One‐MonthUSTreasuryBills $1.00 $1.13 $1.26 $2.01

TheS&PdataareprovidedbyStandard&Poor'sIndexServicesGroup.Russelldatacopyright©RussellInvestmentGroup1995‐2010,allrightsreserved.MSCIdatacopyrightMSCI2010,allrightsreserved.DowJonesdata(formerlyDowJonesWilshire)providedbyDowJonesIndexes.USlong‐termbonds,bills,andinfla9ondata©Stocks,Bonds,Bills,andInfla9onYearbook™,IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinquefield). Indexesarenotavailablefordirect investment. Indexperformancedoesnotreflecttheexpensesassociatedwiththemanagementofanactualporfolio.Pastperformanceisnotaguaranteeoffutureresults.

ValueofStockMarketsAroundtheWorldJanuary1990–September2010

•   Globalmarketcapitaliza9onweightsarenotsta9c,theyvaryacross9me.

Developedmarkets’securi9esandcommodi9esdataprovidedbyBloomberg.EmergingMarkets’dataprovidedbyInterna9onalFinanceCorpora9on.TheRussell3000IndexisusedastheproxyfortheUSmarket.Theproxiesforthenon‐USdevelopedandemergingmarketsaretherespec9vedevelopedcountryandemergingcountrypor9onsfromtheMSCIAllCountryWorldIMIexUSAIndex.TheproxiesfortheUK,Canada,andAustraliaaretherelevantsubsetsofthedevelopedmarketproxy.

Weights

NumberofCountries

NumberofStocks TotalValue September30,2010

ChangeFromPreviousQuarter

01/90‐9/10Average

UnitedStates 1 2,954 12.82Trillion 42.91% ‐1.29% 44.66%DevelopedMarkets 23 3,613 12.98Trillion 43.45% 0.72% 50.47%EmergingMarkets 21 2,629 4.07Trillion 13.64% 0.56% 4.87%Total 45 9,196 29.87Trillion 100.00%

6

TheRandomnessofQuarterlyReturns

Q22007

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

15.05 14.52 3.66 2.14 0.58 4.78 23.36 1.02 34.84 35.44 9.18 9.81 8.40 18.16 ?

6.98 2.71 1.97 0.52 0.53 0.43 0.20 0.03 31.46 21.04 8.58 8.85 0.02 16.14 ?

6.28 2.56 0.93 ‐1.13 ‐0.80 ‐1.12 ‐21.15 ‐11.01 25.86 19.36 6.04 6.79 ‐4.13 13.22 ?

div.) 4.93 2.03 ‐1.62 ‐8.69 ‐1.17 ‐6.11 ‐21.94 ‐12.43 20.68 19.28 4.22 5.39 ‐8.29 11.29 ?

) 4.42 1.42 ‐3.33 ‐8.72 ‐2.49 ‐8.37 ‐22.18 ‐13.14 16.69 18.24 3.88 2.45 ‐9.93 11.29 ?

1.26 1.14 ‐4.58 ‐9.45 ‐2.72 ‐8.54 ‐26.12 ‐14.95 15.93 15.61 2.44 1.53 ‐11.14 10.13 ?

‐1.88 ‐0.24 ‐5.80 ‐9.90 ‐5.32 ‐20.67 ‐27.56 ‐16.77 8.24 11.09 0.01 1.35 ‐11.43 4.98 ?

‐9.36 ‐3.09 ‐13.54 ‐10.92 ‐5.39 ‐26.86 ‐39.95 ‐33.92 0.02 0.03 ‐2.17 0.01 ‐13.63 0.04 ?

TheS&PdataareprovidedbyStandard&Poor'sIndexServicesGroup.Russelldatacopyright©RussellInvestmentGroup1995‐2010,allrightsreserved.MSCIdatacopyrightMSCI2010,allrightsreserved.DowJonesdata(formerlyDowJonesWilshire)providedbyDowJonesIndexes.USlong‐termbonds,bills,andinfla9ondata©Stocks,Bonds,Bills,andInfla9onYearbook™,IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinquefield). Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreflecttheexpensesassociatedwiththemanagementofanactualporfolio.Pastperformanceisnotaguaranteeoffutureresults.

HighestReturn

LowestReturn

Thistableshowsfromtoptobolomthe highest returning asset classeseachyearover the last14quarters.Each asset class is color codedbasedonthelegendbelow.

Thelackofapalernindicatesthatpickingwhichassetclasseswillbethebestorworstperformersisvirtuallyimpossible.

InQ42008,forexample,theMSCIEmergingMarketsIndexwasthesecondtoworstperformingassetclass.Aquarterlateritwasrightupatthetop.

Porfolioscombiningthesevariousinvestmentswillavoidextremereturns.

USLargeCapStocks(S&P500)

USSmallCapStocks(Russell2000)

USLargeValueStocks(Russell1000Value)

Interna9onalDevelopedStocks(MSCIWorldexUSA)

EmergingMarketsStocks(MSCIEmergingMarkets)

RealEstate(DowJonesUSSelectREIT)

One‐MonthUSTreasuryBills

Long‐TermCorporateBonds

7

ReturnsofGloballyDiversifiedPorfoliosAsofSeptember30,2010

January1988startdatebasedonthelatestcommonindexincep9on. GlobalStocksrepresentedbyMSCIAllCountryWorldIndex(grossdiv.)andTreasuryBillsrepresentedbyUSOne‐MonthTreasuryBills.DatacopyrightMSCI2010,allrightsreserved.©Stocks,Bonds,Bills,andInfla9onYearbook™,IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinquefield).Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreflecttheexpensesassociatedwiththemanagementofanactualporfolio.Pastperformanceisnotaguaranteeoffutureresults.

Annualized(%)

Q32010 OneYear ThreeYears FiveYears TenYears TwentyYears

100%GlobalStocks 14.46 8.95 ‐6.97 2.93 2.13 7.8375/25 10.83 7.01 ‐4.48 3.20 2.49 6.9950/50 7.22 4.88 ‐2.34 3.20 2.65 6.0025/75 3.62 2.57 ‐0.53 2.94 2.60 4.84100%TreasuryBills 0.04 0.09 0.93 2.43 2.35 3.55

Posi9vevs.Nega9veMonths:January1988–September2010,Total273months

8

USStockReturnsAsofSeptember30,2010

Russelldatacopyright©Russell InvestmentGroup1995‐2010,all rights reserved.TheS&PdataareprovidedbyStandard&Poor's IndexServicesGroup. Indexesarenotavailable fordirectinvestment.Indexperformancedoesnotreflecttheexpensesassociatedwiththemanagementofanactualporfolio.Pastperformanceisnotaguaranteeoffutureresults.

Returns(%)

AssetClass Index Q32010 OneYearThreeYearsAnnualized

Marketwide Russell3000 11.52 10.96 ‐6.60LargeCap S&P500 11.29 10.16 ‐7.16LargeCap Russell1000 11.56 10.75 ‐6.79LargeCapValue Russell1000Value 10.13 8.91 ‐9.38LargeCapGrowth Russell1000Growth 13.00 12.66 ‐4.36SmallCap Russell2000 11.29 13.34 ‐4.29SmallCapValue Russell2000Value 9.72 11.84 ‐4.99SmallCapGrowth Russell2000Growth 12.82 14.78 ‐3.75

•  Historically,valuestocks,asmeasuredbythera9oofbook‐to‐marketequity(BtM),haveoutperformedgrowthstocksoverthelongterm.Duringthethirdquartervaluestocksunderperformedgrowthstocks.

•  Historically,smallstockshaveexperiencedhigherreturnsthanlargestocksoverthelongterm.Duringthethirdquartersmallcapsstocksgenerallyunderperformedlargecapstocks.

9

Interna9onalStockReturnsAsofSeptember30,2010 Returns(%)

AssetClass Index Q32010 OneYearThreeYearsAnnualized

Marketwide MSCIAllCountryWorldexUSA 16.58 7.56 ‐7.42DevelopedLargeCap MSCIWorldexUSA 16.14 4.14 ‐8.96DevelopedSmallCap MSCIWorldexUSASmallCap 17.75 10.86 ‐6.31DevelopedValue MSCIWorldexUSAValue 15.83 ‐0.23 ‐9.97DevelopedGrowth MSCIWorldexUSAGrowth 16.44 8.69 ‐8.02EmergingMarketsLargeCap MSCIEmergingMarkets 18.23 20.05 ‐1.59EmergingMarketsSmallCap MSCIEmergingMarketsSmall 20.48 32.32 1.26EmergingMarketsValue MSCIEmergingMarketsValue 16.76 19.11 0.75EmergingMarketsGrowth MSCIEmergingMarketsGrowth 19.31 21.34 ‐3.74

MSCIdatacopyrightMSCI2010,allrightsreserved.Interna9onaldevelopedrepresentedbyMSCIWorldexUSAindexandEmergingMarketsbyMSCIEmergingMarketsIndex.Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreflecttheexpensesassociatedwiththemanagementofanactualporfolio.Pastperformanceisnotaguaranteeoffutureresults.

IMPACTOFCURRENCYFLUCTUATIONSONRETURNSFORINVESTORSINUSDOLLARSOneYearReturnsinUSDollarsandLocalCurrency ThreeYearAnnualizedReturnsinUSDollarsandLocalCurrency

10

OneYearReturnsinUSDollarsandLocalCurrency

ReturnUS

Dollars

ReturnLocal

CurrencyImpactofCurrency

1.Chile 57.13% 37.99% 19.14%

2.Philippines 52.35% 41.11% 11.24%

.

.

26.UnitedStates 9.62% 9.62% ‐

.

.

44.Ireland ‐25.12% ‐19.83 ‐5.29%

45.Greece ‐52.38% ‐49.02 ‐3.36%

ThirdQuarter2010Returns

ReturnUS

Dollars

ReturnLocal

CurrencyImpactofCurrency

1.  Poland 35.46% 16.79% 18.67%

2.Chile 32.55% 16.89% 15.66%

.

.

.

40.UnitedStates 11.36% 11.36% ‐

.

44.Japan 5.83% ‐0.91% 6.74%

45.Ireland ‐3.55% ‐13.46% 9.91%

MSCICountryReturnsinUSDollarsandLocalCurrencyAsofSeptember30,2010

11MSCIdatacopyrightMSCI2010,allrightsreserved.

TENYEARPERFORMANCERANKINGOFMARKETSAROUNDTHEWORLDINUSDOLLARSASOFJUNE30,2010

1.Colombia2.Peru3.Indonesia4.CzechRepublic5.Egypt6.Brazil 7.Russia8.India9.Chile10.Mexico11.Thailand12.SouthAfrica13.Morocco14.Korea15.Denmark16.Hungary17.Australia18.Malaysia19.China20.Norway21.Philippines22.Singapore23.Canada24.Austria25.Poland26.Switzerland27.Turkey28.Israel29.HongKong30.Spain31.NewZealand32.Sweden33.Germany34.UnitedKingdom35.Portugal36.Netherlands37.Belgium38.France39.USA40.Taiwan41.Japan42.Italy43.Ireland44.Greece45.Finland

RealEstateInvestmentTrusts(REIT)StocksAsofSeptember30,2010

NumberofREITstocksandtotalvaluebasedonthetwoindices.DowJonesUSSelectREITIndexdataprovidedbyDowJones©.S&PGlobalexUSREITIndexdataprovidedbyStandardandPoor’s©.Indexesarenotavailablefordirectinvestment.Indexperformancedoesnotreflecttheexpensesassociatedwiththemanagementofanactualporfolio.Pastperformanceisnotaguaranteeoffutureresults.

12

Returns(%)

Index Q32010 OneYearThreeYearsAnnualized

DowJonesUSSelectREITIndex 13.22 30.14 ‐6.98S&PGlobalexUSREITIndex 21.88 10.09 ‐13.26

NumberofREITStocks TotalValueofREITStocks

56%

US$265B

WorldexUS$226B

BondReturnsAsofSeptember30,2010

YieldCurvedatafromFederalReserve.StateandLocalBondsarefromtheBondBuyerIndex,generalobliga9on,20yearstomaturity,mixedquality.HighQualityCorporateBondsrepresenttheMoody’s seasoned Aaa Corporate Yield. Investment Grade Corporate Bonds represent theMoody’s seasoned Baa Corporate Yield. Barclays Capital data, formerly Lehman Brothers,providedbyBarclaysBankPLC.USlong‐termbonds,bills,infla9on,andfixedincomefactordata©Stocks,Bonds,Bills,andInfla9on(SBBI)Yearbook™,IbbotsonAssociates,Chicago(annuallyupdatedworkbyRogerG.IbbotsonandRexA.Sinquefield).Ci9groupbondindexescopyright2010byCi9group.TheMerrillLynchIndicesareusedwithpermission;copyright2010MerrillLynch, Pierce, Fenner & Smith Incorporated; all rights reserved. Indexes are not available for direct investment. Index performance does not reflect the expenses associated with themanagementofanactualporfolio.Pastperformanceisnotaguaranteeoffutureresults.

Returns(%)

Index Q32010OneYear

ThreeYearsAnnualized

One‐MonthUSTreasuryBills(SBBI) 0.04 0.09 0.93BankofAmericaMerrillLynchThree‐MonthT‐Bills 0.04 0.13 1.13BankofAmericaMerrillLynchOne‐YearUSTreasuryNote 0.25 0.91 2.60Ci9groupWorldGovernmentBond1‐5Years(hedged) 0.83 2.83 4.45USLongTermGovernmentBonds(SBBI) 5.64 13.37 10.84BarclaysCapitalCorporateHighYield 6.71 18.44 8.75BarclaysCapitalMunicipalBonds 3.40 5.81 6.04BarclaysCapitalUSTIPSIndex 2.48 8.89 6.91

USTreasuryYieldCurve

13

BondYieldsAcrossDifferentBondIssuers

14

TheTabletopGuidetoMutualFundsIseverythingyouneedtoknowaboutmutualfundinves9ngcontainedonanapkin?

Probablynot.ButarecentMorningstarstudysuggeststhatkeepingthisbitoffoldedwisdominyourpocketmightbemorehelpfulthanconsul9nganarmyofexpertsinthesearchforclevermoneymanagers.Morningstarexaminedfivebroadcategoriesofequityandfixed‐incomefundsovermul9pleperiodsbeginningin2005,2006,2007and2008andendinginMarch2010.Fundsweresortedintoquin9lesbasedonexpensesandtheperformanceofthecheapestfundswascomparedtothatofthemostexpensive.TheycomputedtotalreturnforfundssurvivingthroughMarch2010aswellasa"successra9o"measuringthepercentageoftheini9alcohortthatwentontosurviveandoutperformtheirpeers.Unsurprisingly,cheapfundsoutperformedtheirexpensivecousins.Commen9ngontheresults,MorningstarDirectorofMutualFundResearchRusselKinnelobserved:"Ineverysingle.meperiodanddatapointtested,low‐costfundsbeathigh‐costfunds."1

AsimilarexerciseevaluatedthesamefundsusingtheMorningstarRa9ngsassignedatthebeginningofeach9meperiod.Thera9ngsshowedpredic9vepoweraswell,althoughnotaspronouncedastheexpensesra9os."Ingeneral,"Kinelstates,"5‐starmutualfundsbeat1‐starfundsonourthreemeasures,althoughtherewereexcep9ons.Alltold,thestarsguidedinvestorstobelerresultsin59outof70(84%)observa9ons.“Sowhichmeasureismoreusefulforinvestors—fundexpensesorra9ngs?Morningstardeclinestocrownachampion,findingmeritinboth.Expenseswereamorereliablepredictor("theyworkedevery9me"),whilestarscouldbehelpful"Iniden9fyingfundsthatmightbemergedoutofexistence."

Forreasonsuncleartous,thepredic9vepowerofexpensesinthisexercisewasmorepronouncedamongequityfundsthanfixedincomeorbalancedvehicles.Amongbothdomes9candinterna9onalequityfunds,totalreturnsinevery9meperiodwerehigherforthecheapestfundscomparedtothe5‐starfunds.Morningstarconcludesthat"Investorsshouldmakeexpensera9osaprimarytestinfundselec9on.Theyares9llthemostdependablepredictorofperformance.“Soundsgoodtous.

Waiter,I’llkeepthatnapkin.

1.RusselKinnel."FundSpy—HowFundExpenseRa.osandStarRa.ngsPredictSuccess"Morningstar,August9,2010.ThissketchbyCarlRichardsoriginallyappearedinTheNewYorkTimes.MoreofhissketchescanbefoundatBehaviorgap.com.

15

MichaelMoore

1120CrestlineCourt•LakeOswego•OR97034

Telephone:503‐635‐4457

mike@crestlinecapital.net

www.crestlinecapital.net

Crestline Capital, LLCCC