DISCLOSURE DOCUMENT COVENANT CAPITAL MANAGEMENT OF TENNESSEE, LLC COMMODITY TRADING ADVISOR Elder Place Nashville, TN (615)

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1 DISCLOSURE DOCUMENT OF COVENANT CAPITAL MANAGEMENT OF TENNESSEE, LLC COMMODITY TRADING ADVISOR 4122 Elder Place Nashville, TN (615) THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS TRADING PROGRAM NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT. THE DELIVERY OF THIS DISCLOSURE DOCUMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION IT CONTAINS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE SHOWN BELOW. The date of first intended use of this document is March 31,

2 RISK DISCLOSURE STATEMENT THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD BE AWARE OF THE FOLLOWING: 1. IF YOU PURCHASE A COMMODITY OPTION YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIUM AND OF ALL TRANSACTION COSTS. 2. IF YOU PURCHASE OR SELL A COMMODITY FUTURE OR SELL A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE INITIAL MARGIN FUNDS AND ANY ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR BROKER TO ESTABLISH OR MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUESTED FUNDS WITH IN THE PRESCRIBED TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR ANY RESULTING DEFICIT IN YOUR ACCOUNT. 3. UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO LIQUIDATE A POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE MARKET MAKES A "LIMIT MOVE." 4. THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A "STOP-LOSS" OR "STOP-LIMIT" ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. 5. A "SPREAD" POSITION MAY NOT BE LESS RISKY THAN A SIMPLE "LONG" OR "SHORT" POSITION. 6. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS, ON PAGES 14 AND 15, A COMPLETE DESCRIPTION OF EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE COMMODITY TRADING ADVISOR. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY MARKETS. YOU SHOULD 2

3 THEREFORE CAREFULLY STUDY THIS DISCLOSURE DOCUMENT AND COMMODITY TRADING BEFORE YOU TRADE, INCLUDING THE DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGE 8. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY TRADING ADVISOR MAY ENGAGE IN TRADING FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE YOUR TRANSACTIONS MAY BE EFFECTED. BEFORE YOU TRADE, YOU SHOULD INQUIRE ABOUT ANY RULES RELEVANT TO YOUR PARTICULAR CONTEMPLATED TRANSACTIONS AND ASK THE FIRM WITH WHICH YOU INTEND TO TRADE FOR DETAILS ABOUT THE TYPES OF REDRESS AVAILABLE IN BOTH YOUR LOCAL AND OTHER RELEVANT JURISDICTIONS. THIS COMMODITY TRADING ADVISOR IS PROHIBITED BY LAW FROM ACCEPTING FUNDS IN THE TRADING ADVISOR'S NAME FROM A CLIENT FOR TRADING COMMODITY INTERESTS. YOU MUST PLACE ALL FUNDS FOR TRADING IN THIS TRADING PROGRAM DIRECTLY WITH A FUTURES COMMISSION MERCHANT. RISK DISCLOSURE STATEMENT THE RISK OF LOSS IN FOREX TRADING CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD ALSO BE AWARE OF THE FOLLOWING: FOREX TRANSACTIONS ARE NOT TRADED ON AN EXCHANGE, AND THOSE FUNDS DEPOSITED WITH THE COUNTERPARTY FOR FOREX TRANSACTIONS MAY NOT RECEIVE THE SAME PROTECTIONS AS FUNDS USED TO MARGIN OR GUARANTEE EXCHANGE-TRADED FUTURES AND OPTIONS CONTRACTS. IF THE COUNTERPARTY BECOMES INSOLVENT AND YOU HAVE A CLAIM FOR AMOUNTS DEPOSITED OR PROFITS EARNED ON TRANSACTIONS WITH THE COUNTERPARTY, YOUR CLAIM MAY NOT RECEIVE A PRIORITY. WITHOUT A PRIORITY, YOU ARE A GENERAL CREDITOR AND YOUR CLAIM WILL BE PAID, ALONG WITH THE CLAIMS OF OTHER GENERAL CREDITORS, FROM ANY MONIES STILL AVAILABLE AFTER PRIORITY CLAIMS ARE PAID. EVEN CUSTOMER FUNDS THAT THE COUNTERPARTY KEEPS SEPARATE FROM ITS OWN OPERATING FUNDS MAY NOT BE SAFE FROM THE CLAIMS OF OTHER GENERAL AND PRIORITY CREDITORS. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FOREX TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. 3

4 MANAGED ACCOUNTS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES AND THE ACCOUNT MAY NEED TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETING OR EXHAUSTING ITS ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE ACCOUNT MANAGER. (SEE PAGE 15). THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND SIGNIFICANT ASPECTS OF THE FOREX MARKETS. THEREFORE, YOU SHOULD CAREFULLY REVIEW THIS DISCLOSURE DOCUMENT BEFORE YOU TRADE, INCLUDING THE DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT (SEE PAGE 8). NATIONAL FUTURES ASSOCIATION HAS NEITHER PASSED UPON THE MERITS OF PARTICIPATING IN THIS TRADING PROGRAM NOR THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT. THIS COMMODITY TRADING ADVISOR IS PROHIBITED BY LAW FROM ACCEPTING FUNDS IN THE TRADING ADVISOR S NAME FROM A CLIENT FOR TRADING COMMODITY INTERESTS. YOU MUST PLACE ALL FUNDS FOR TRADING IN THIS TRADING PROGRAM DIRECTLY WITH A FUTURES COMMISSION MERCHANT. 4

5 TABLE OF CONTENTS Covenant Capital Management of Tennessee, LLC 6 Principals and Background 6 Original Program 7 Aggressive Program 8 Optimal Program 8 Long Commodity Program 8 New Accounts 8 Principal Risk Factors 8 Special Disclosure for Notionally-Funded Accounts 11 Cash Additions and Withdrawals 13 Forex and Forward Trading 13 Options 14 Fees 14 Early Withdrawal Penalty 14 Potential Conflicts of Interest 15 Administrative, Civil, or Criminal Actions 15 Privacy Policy 15 Page Past Trading Performance 16 Original Program-Customer Performance 17 Aggressive Program-Customer Performance 18 Long Commodity Program-Customer Performance 19 Optimal Program-Customer Performance 20 Original Program-Proprietary Performance 21 Optimal Program-Proprietary Performance 22 5

6 Covenant Capital Management of Tennessee, LLC Covenant Capital Management (CCM) is a Limited Liability Company (LLC) organized June 1, 1999, originally existing under the laws of the state of Delaware as Covenant Capital Management of Tennessee, LLC. It is registered to do business in the state of Tennessee as Covenant Capital Management, LLC. CCM was reorganized in the state of Tennessee on August 29, At this time it dissolved its organization in the state of Delaware. Its principal business address and telephone are 4122 Elder Place Nashville, Tennessee 37215, and (615) Scot Billington and Brince Wilford are the only principals of CCM. CCM is registered with the Commodity Futures Trading Commission (CFTC) as a Commodity Trading Advisor (CTA) and became a member of the National Futures Association (NFA) in such capacity on July 30, The document will be used beginning March 31, 2010 through December 31, No person is authorized by Covenant Capital Management to give any information or to make any representation not contained herein. CCM s past trading performance can be found on pages of this document. Principals and Backgrounds Scot Billington is the Chief Manager, the Head Trader, and a 45.05% equity holder of CCM. Mr. Billington is registered with the CFTC as a principal and associated person of CCM. Mr. Billington developed the trading systems that will be used by CCM. He is actively involved in every aspect of CCM s business and trading. Mr. Billington worked as an assistant trader from for Bradford & Co., Incorporated, a Futures Commission Merchant (FCM) and division of J. C. Bradford & Co July 1993 until May 1999 when he began forming CCM. At J.C. Bradford he was responsible for executing client orders, advising clients, and developing systems. Beginning in April of 2002, Mr. Billington worked for Ronin Capital, an Option Trading Investment Company at the Chicago Board Options Exchange where his main function was making markets in the OEX 100 Index options market. Mr. Billington was a member of the Chicago Board Options Exchange and a Market Maker at Ronin Capital in OEX 100 Index options until January 4, Mr. Billington has been a principal and associated person of the advisor since inception on July 30, 1999 and he became a branch office manager of the advisor on July 13, Brince Wilford is the Secretary and is a 45.05% equity holder of CCM. He is registered with the CFTC as a principal and associated person of CCM. Mr. Wilford assists in the execution of trades as directed by Mr. Billington. He is actively involved in every aspect of CCM s business and trading. From August of 1999 to July of 2002 he served as Director of Business Development for Inphact, Inc. His primary responsiblity was directing sales and national accounts. Inphact was a provider of radiology services over the Internet. Mr. Wilford worked for Healthcare Realty Trust, Inc. in the Investments Department from August of 2002 through January of 2006 where his primary responsibilities included business development, financial modeling, consulting and acquisitions work. Healthcare Realty Trust is a publicly traded Real Estate Investment Trust (NYSE:HR). Mr. Wilford resigned from Healthcare Realty in 2006 to focus full time on the advisory. He returned to part-time employment at Healthcare Realty in January of 2008 where he manages the Acquisitions Department. Presently, Mr. Wilford provides investment consulting services to various firms in the healthcare, real estate, and entertainment industries. Mr. Wilford has been registered as a principal and associated person of the advisor since July 30,

7 Mr. Billington and Mr. Wilford may both work in consulting roles for profit or non-profit organizations in the future. They also may undertake other business interests. They both expect to serve on the boards of various for profit and non- profit organizations in the future. Original Trading Program CCM takes positions based on a long-term, technical, trend following system created by Mr. Billington and Mr. Wilford. Discretion is used only in extremely rare cases to interpret the existing rules of the system. Technical analysis uses the theory that a study of the markets themselves will provide a means of anticipating price changes. The system attempts to participate in long-term market trends. It does not try to predict trends. The system does not try to predict when a trend will start, how long it will last, or how high or low it will move. After a trend has occurred, CCM does not seek to explain why a trend may have occurred or why it behaved as it did. The only prediction made is that trends will continue to exist as a phenomenon of the market place. CCM can only recognize a trend after some, most or all of it has already occurred. The system identifies when a trend may be beginning and enters the market at that point. The same technical analysis indicates when the trend may be ending, and signals to exit the market at that point. The system is set up to minimize commissions and the number of trades per market when compared to other futures trading systems. Stop losses will be placed in the market as soon as entries are made, and they will be modified weekly. A stop may not necessarily be changed from week to week. The system does not allow more than one round turn trade a week in a given market. Initial risk will be limited to a fixed percentage of the core equity (core equity is the total equity in the account less the total amount at risk in other open positions) of the account. As profits accumulate in a position, a greater percentage of risk will be tolerated; however, at a constant pre-determined level, CCM may use options or may decrease the position size to reduce risk. Exits are executed on trailing stops. Position size may be dramatically reduced to lower risk, but a position will not be exited until the market hits the pre-determined trailing stop level. CCM may use multiple triggers to enter and exit a position incrementally and at different times. CCM trades a diverse portfolio of markets and market sectors including but not limited to, metals, meats, grains, energies, softs, foreign currencies, domestic and foreign interest rates, and domestic and foreign stock indices. By broadly diversifying across a wide array of markets, CCM attempts to diminish the importance of any one position in the portfolio. The individual positions are designed to be relatively small and the stops are designed to be relatively wide to avoid multiple entries and exits that increase the commission burden on an account. Larger initial risks per contract minimize the effects of large gap moves through the stop levels as a percentage of the original risk. Clients should expect annual drawdowns of at least 10-15% in this program. CCM conducts continuing research to improve its trading methodology and risk management parameters. Markets may be added to or subtracted from the portfolio. CCM may make changes to its investment strategies without notifying current investors. This program began trading September 1, 1999 with both proprietary and client funds. 7

8 Aggressive Program This program will take the exact same trading signals as the Original Program; however, it will take roughly 1.75 times the position size than the same account would take in the Original Program. This will result in considerably larger swings in account equity. This program has lower minimum account sizes. Participants in this program must be prepared for larger drawdowns and nearly twice the volatility of the Original Program. This program began trading in January of Optimal Program This program will take initial risks up to 5 times that of the Original Program. While the trades will be the same as the Original Program, the dramatic differences in position sizes and account volatility may result in much different results. Drawdowns in excess of 50% will be common in this program. CCM will utilize a money management overlay that will decrease the account sizes when certain return hurdles have been reached. This program began proprietary trading in August of Long Commodity Program This program differs from the Original Program in trades taken, trade size, and portfolio composition. This program only trades commodities and does not trade any currency, stock index, or interest rates. This program takes only long signals and will take some long signals not taken by the other programs. This program began trading in March of New Accounts-Account Increases/Decreases Monies placed into new accounts and increases in existing accounts are risked on new positions only and are not entered into existing positions unless said position is below the model s volatility parameters for trade entry. Position sizes WILL be decreased to reflect any account withdrawals. This may lead to potentially drastic differences in the performance of new accounts versus existing accounts for the duration of any existing positions. The timing of account increases or decreases could potentially have a material effect on overall performance. Principal Risk Factors A prospective client interested in opening a managed account with CCM should carefully consider the highly speculative nature of trading commodity interests and the possibility that he may lose more than the amount of money initially deposited in his commodity brokerage account. CCM will lose money during periods without sustained market trends. Open trade profits will be reduced, sometimes significantly or entirely, when markets change trend. If many of the markets in the portfolio are not trending, losses will be substantial. If there are several significant reversals of trend simultaneously, much of the profits generated from those trends may be lost. Drawdowns of 10%-15% or more are not unusual. Additional risk factors covered below and 8

9 elsewhere in this document should be seriously considered before investing funds with Covenant Capital Management. There can be no assurances made that CCM's methods will be successful. Futures and forward trading is a highly speculative zero sum endeavor in which there is an equal offsetting loss for every gain. After various commissions and fees are paid, the trading of futures and forwards becomes a negative sum game in which the losers lose more than the winners profit. A client's account may incur certain risks relating to the initial investment of its assets. Due to market conditions, CCM may take several days (or months) before a new account is fully invested. A new account may enter markets that have already been in sustained trends; therefore, incurring more initial risk than would have been taken had the account entered the trade at the original signal. Commodity contract prices can be highly volatile. Price movements may be influenced by domestic or foreign factors, changes in supply and demand relationships, weather, trade policies and programs, fiscal policies, monetary policies, political events, rates of inflation, currency devaluation, and many other known or unknown factors. In addition governments from time to time intervene, directly and indirectly, in certain markets. Such intervention is often intended to influence price. A client is also subject to the risk of the failure of any of the exchanges on which CCM trades or any of their clearinghouses. The client is also at risk of a bankruptcy or failure of the FCM that holds the assets of the account. None of these factors can be controlled by CCM, and no assurance can be given that CCM's advice will result in profitable trades for a client or that a client will not incur substantial losses. The low margin deposits required to trade commodities permit a high degree of leverage. Initial margin in futures is a performance bond that the investor will comply with the terms of the contract; it is not a borrowing. Usually only 2%-18% of the contract's value is required on deposit. Relatively small price movements in the contract can cause large percentage losses to the investor. A trade can easily lose more than the original margin deposit. When the market value of a particular open position changes to a point where the margin on deposit in a client's account does not satisfy the maintenance margin requirement, the client, not CCM, will receive a margin call from the FCM. If the margin call is not met within the time set by the FCM, the FCM has the right to close out the position. Most U. S. commodity exchanges limit daily price fluctuations ("daily limits"). During a trading day, no trades can take place beyond these daily limits. Once the price reaches the daily limit, positions cannot be taken or liquidated beyond that limit. Occasionally, trading will in effect halt at the limit price creating a situation called "locked limit". Prices have traded locked limit for several days in a row. This situation could prevent CCM from liquidating losing positions and subject a client to substantial losses beyond the margin initially committed to such trades. Under some conditions, a client may be required to take delivery of the physical commodity. The CFTC could suspend or limit trading in a particular contract, order immediate liquidation and settlement of a particular contract, or order that trading in a particular contract be conducted for liquidation only. CCM will occasionally engage in trading on commodity exchanges outside of the U. S. Trading on such exchanges is not regulated by any U. S. governmental agency and may involve certain risks not applicable to trading on U. S. exchanges. For example, some foreign exchanges, in contrast to U. S. exchanges are "principals' markets" in which performance is the responsibility only of the individual member with whom the trader has entered into a futures contract and not 9

10 of an exchange or clearing corporation. Moreover, such trading may be subject to whatever regulatory provisions are applicable to transactions effected outside the U. S., whether on foreign exchanges or otherwise. Trading on foreign exchanges involves the additional risks of expropriation, burdensome or confiscatory taxation, moratoriums, and investment controls or political or diplomatic events that might adversely affect CCM's trading activities. Engaging in trading on foreign exchanges is also subject to the risk of changes in the exchange rate between United States Dollars and the currencies in which contracts traded on such exchanges are settled. Although the CFTC is prohibited by statute from promulgating rules which govern in any respect, any rule, contract term or action of any foreign commodity exchange, the CFTC has full authority to regulate the sale of foreign futures contracts within the U. S. It has adopted regulations, which may restrict the clients for whom, or with whom CCM may trade and the contracts, and markets on which CCM trades, which may have an impact on future performance results. CCM uses stops to limit risk in given positions. These stops do not guarantee an exit at the price or even at all. THE PLACEMENT OF CONTINGENT ORDERS BY CCM, SUCH AS A "STOP-LOSS" OR "STOP-LIMIT" ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. The CFTC and United States exchanges have established limits referred to as "position limits" on generally the maximum net long or net short speculative position which any person or group of persons may hold or control in particular commodity interest contracts. In addition, the CFTC requires U. S. exchanges to set position limits on all contracts that do not have such limits. All accounts managed and controlled by CCM (including the accounts of clients) are aggregated for position limit purposes. It is possible from time to time that the trading decisions of CCM may have to be modified and position held or controlled by it may have to be liquidated in order to avoid exceeding applicable position limits. Such modification or liquidation, if required, could adversely affect the performance of the accounts of clients. Participating customer s FCM may fail. Under CFTC regulations, FCM s are required to maintain customer s assets in a segregated account. If a customer s FCM fails to do so, the customer may be subject to risk of loss of funds in the event of its bankruptcy. Even if such funds are properly segregated, the customer may still be subject to a risk of a loss of his funds on deposit with the FCM should another customer of the FCM or the FCM itself fail to satisfy deficiencies in such other customer s accounts. Bankruptcy law applicable to all U.S. futures brokers requires that, in the event of the bankruptcy of such a broker, all property held by the broker, including certain property specifically traceable to the customer, will be returned, transferred or distributed to the broker s customers only to the extent of each customer s pro-rata share of all property available for distribution to customers. If any futures broker retained by the customer were to become bankrupt, it is possible that the customer would be able to recover none or only a portion of its assets held by such futures broker. The Internal Revenue Code of 1986, as amended, provides that investment advisory fees are to be aggregated with unreimbursed employee business expenses and other expenses of producing income collectively called "Aggregate Investment Expenses". The aggregate amount of such expenses will be deductible only to the extent such amount exceeds 2% of a taxpayer's adjusted gross income. In addition, Aggregate Investment Expenses in excess of the 2% threshold, when combined with certain other deductions, are subject to a reduction, generally equal to 3% of the taxpayer's adjusted gross income in excess of a threshold amount. Such limitation could 10

11 substantially reduce the deductibility for federal income tax purposes on any amounts deemed to constitute "investment advisory fees". The incentive fees payable to Covenant Capital Management may be characterized as investment advisory fees subject to the above limitation. EACH CLIENT, THEREFORE, MAY PAY TAX ON MORE THAN THE NET PROFITS GENERATED IN THEIR ACCOUNT. EACH PROSPECTIVE CLIENT MUST CONSULT AND DEPEND ON HIS OWN TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF PARTICIPATING IN CCM'S TRADING PROGRAM. SPECIAL DISCLOSURE FOR NOTIONALLY-FUNDED ACCOUNTS YOU SHOULD REQUEST YOUR COMMODITY TRADING ADVISOR TO ADVISE YOU OF THE AMOUNT OF CASH OR OTHER ASSETS (ACTUAL FUNDS) WHICH SHOULD BE DEPOSITED TO THE ADVISOR'S TRADING PROGRAM FOR YOUR ACCOUNT TO BE CONSIDERED "FULLY-FUNDED". THIS IS THE AMOUNT UPON WHICH THE COMMODITY TRADING ADVISOR WILL DETERMINE THE NUMBER OF CONTRACTS TRADED IN YOUR ACCOUNT AND SHOULD BE AN AMOUNT SUFFICIENT TO MAKE IT UNLIKELY THAT ANY FURTHER CASH DEPOSITS WOULD BE REQUIRED FROM YOU OVER THE COURSE OF YOUR PARTICIPATION IN THE COMMODITY TRADING ADVISOR'S PROGRAM. YOU ARE REMINDED THAT THE ACCOUNT SIZE YOU HAVE AGREED TO IN WRITING (THE "NOMINAL" OR "NOTIONAL" ACCOUNT SIZE) IS NOT THE MAXIMUM POSSIBLE LOSS THAT YOUR ACCOUNT MAY EXPERIENCE. YOU SHOULD CONSULT THE ACCOUNT STATEMENTS RECEIVED FROM YOUR FUTURES COMMISSION MERCHANT IN ORDER TO DETERMINE THE ACTUAL ACTIVITY IN YOUR ACCOUNT, INCLUDING PROFITS, LOSSES AND CURRENT CASH EQUITY BALANCE. TO THE EXTENT THAT THE EQUITY IN YOUR ACCOUNT IS AT ANY TIME LESS THAN THE NOMINAL ACCOUNT SIZE YOU SHOULD BE AWARE OF THE FOLLOWING: ALTHOUGH YOUR GAINS AND LOSSES, FEES AND COMMISSIONS MEASURED IN DOLLARS WILL BE THE SAME, THEY WILL BE GREATER WHEN EXPRESSED AS A PERCENTAGE OF ACCOUNT EQUITY. YOU MAY RECEIVE MORE FREQUENT AND LARGER MARGIN CALLS. Further Disclosure for Notionally-Funded Accounts The following is not a recommendation by CCM to clients to fund accounts notionally. All clients should understand that the agreed upon account size is the amount upon which CCM will determine the number of contracts traded in your account. Drawdowns do occur and should be expected by any investor. Please review the implications of drawdowns on a notionalized account and consult with CCM before considering this investment strategy. We wish to emphasize that any account opened with CCM must be considered to be a minimum investment of $300,000 by the client. In the event of a severe drawdown, the client should be prepared to increase his deposit in a notionalized account in order to maintain the account. 11

12 Notional funds in a client s account are funds not actually held in the account, but which a client has committed to the trading activity of the account. The tables on the following page are provided to help disclose the effects notionalizing has on returns and drawdowns. Rates of Return for Various Funding Levels Actual ROR 50% 50% 67% 100% 200% 40% 40% 53% 80% 160% 30% 30% 40% 60% 120% 20% 20% 27% 40% 80% 10% 10% 13% 20% 40% -10% -10% -13% -20% -40% -20% -20% -27% -40% -80% -30% -30% -40% -60% -120% 100% 75% 50% 25% Level of Funding Notionalization Account Size $250,000 $250,000 $250,000 On Deposit $250,000 $187,500 $125,000 Notionalized 0% 25% 50% Notionalized Amount $0 $62,500 $125,000 Rate of return 24% 24% 24% Profit 60,000 60,000 60,000 Effective return on amount deposited 24% 32% 48% Effect of a 10% draw down 25,000 25,000 25,000 Effective drawdown on amount deposited 10% 13% 20% Amount remaining in account 225, , ,000 Effect of a 20% draw down 50,000 50,000 50,000 Effective return on amount deposited 20% 27% 40% Amount remaining in account $200,000 $137,500 $75,000 Effect of a 30% draw down 75,000 75,000 75,000 Effective return on amount deposited 30% 40% 60% Amount remaining in account $175,000 $112,500 $50,000 12

13 Cash Additions/Withdrawals Any cash additions or withdrawals can affect the nominal account size at the client s discretion by increasing, maintaining, or decreasing the level of notionalization. The client should state in writing the level of notionalization to be applied to any new funds deposited. Example: Nominal account size $500,000 Funds on deposit $250,000 Notional % 50% Cash deposit $40,000 New nominal account size $540,000 New funds on deposit $290,000 New notional % 46% The client has decreased his/her leverage by trading his new deposit on a 1:1 basis rather than the 2:1 basis used on his previous funds. Additionally, CCM reserves the right to limit account increases to 25% of original account size, per quarter. Example: A $1M account may increase in size by $250k at any time, but may not increase again until three months later at which time the client may choose to increase the account by another 25%. Forex and Forward Trading CCM may trade forward contracts on foreign currencies or other commodities. A forward contract is a contractual right to buy or sell the underlying commodity at or before a specified date in the future at a specified price. Forward contracts are not traded on exchanges. Rather, banks or other dealers act as principals in these markets. Some foreign exchanges are "principal markets" in which performance is the responsibility only of the individual member with whom the trader has entered into a contract and not of an exchange or clearing corporation. Neither the CFTC nor banking authorities currently regulate forward contract trading, and there is no limitation on the daily price movements of forward contracts. Speculative position limits are not applicable to forward trading. CCM reserves the right to conduct off exchange retail forex trading. Forex transactions are off-exchange leveraged foreign currency transactions. Like many other investments, off-exchange foreign currency trading carries a high level of risk and may not be suitable for all investors. In fact, you could lose all of your initial investment and may be liable for additional losses. Therefore, you need to understand the risks associated with this product so you may make an informed investment decision. Unlike regulated futures exchanges, in the retail off-exchange forex market there is no central marketplace with many buyers and sellers. The forex dealer determines the execution price, so you are relying on the dealer s integrity for a fair price. The principals dealing in the forward markets are not required to continue to make markets in these contracts, and a client will be subject to the risk of the inability or refusal to perform on the part of the principals or agents with or through whom such forward contracts are traded. There have been periods during which certain participants in the forward markets have refused to quote prices for forward contracts or have quoted prices with an unusually wide spread between the bid and the ask. The imposition of credit controls by government authorities might also limit such forward trading. In addition, as forward contracts are not traded on exchanges, there is no exchange guarantee in the event of a counterparty's default. 13

14 In the future the CFTC might assert that the forward contracts traded by CCM constitute unauthorized futures contracts subject to the CFTC's jurisdiction and attempt to prohibit participation in such transactions. Furthermore, a number of the major United States commodity exchanges have expressed considerable concern regarding the proliferation of such instruments. The CFTC has indicated in the past that were forward contracts to be marketed on a retail basis to the United States public at large, it would regard such marketing as a violation of the Commodity Exchange Act. Options An option on a future gives the purchaser the right but not the obligation to take a position in the underlying commodity at the specified strike price. A 'call' gives the purchaser the right to take a long position, and a "put" gives the purchaser the right to take a short position. The purchase price of the option is called the "premium". The seller of the option is credited the premium, but is obligated to take a futures position opposite the options buyer if the option is exercised by the buyer. The buyer of an option has risk limited to the premium paid plus commissions and fees, but the seller of an option has unlimited risk. Fees CCM charges a 20% incentive fee payable December 31 st of each year based on net new trading profits generated during such calendar year. These profits include net gains or losses on closed out positions plus net open position from the first business day of the calendar year to the last business day of the calendar year. These profits must be over and above the aggregate of previous period profits as of the end of any calendar year after deducting incentive fees paid. Interest earned in the account is not subject to incentive fees. Losses from previous years are carried forward and must be recouped before further incentive fees are paid. Accounts closed before the end of a calendar year will pay any fees due at the time the account is closed. Accounts opened after the beginning of the calendar year will pay incentive fees generated due at the end of the current calendar year. Fees that have been paid will not be returned even if losses are incurred in subsequent periods. Accounts opened after the issuance date of this document may also be charged up to a 2% annual management fee, 0.167% of each month s ending total account size, charged monthly. Account size is determined by adding the total equity (cash, cash instruments plus open trade equity) of the account to any notional funds. The management fee may be waived at managers discretion. To date, no management fees have been charged to any accounts. Early Withdrawal Penalty CCM s trading programs are intended for investors committed to a five-year minimum investment timeframe. Any investor focused upon shorter timeframes is discouraged from opening a managed account with CCM by its principals. As such, CCM will collect an Early Withdrawal Fee of 3% of any withdrawals, partial or whole, occurring within thirty-six (36) months of the opening of the account. The Early Withdrawal Fee is calculated as 3% of the amount of the withdrawal, at the date of the withdrawal. After thirty-six months of continuous investment, clients may withdraw and/or close accounts without incurring a withdrawal fee. 14

15 This fee is waived if the account has sustained losses of 25% or more based on the original account size. Account size is determined by adding the total equity of the account to any notional funds. Potential Conflicts of Interest CCM will trade capital for its principals and their close family members. These accounts will be directed exactly like other client accounts. Most orders will be entered as blocks, and the FCM executing such orders shall allocate the fill prices to each account according to an equitable allocation method. The highest priced fills will go to the highest account number, thus benefiting the high account numbers on sales and low account numbers on buys. Any partial fills will be allocated on a rotating basis. This may result in a principal of CCM receiving a superior price compared to a client. In case of a partial fill of a block order, CCM or its principals may not receive the same trade as a client. CCM may also direct proprietary trading in new or existing programs. CCM generally will permit clients or prospective clients to examine the trading records of its proprietary accounts. CCM may manage various accounts according to different fee structures. CCM may enter into a fee sharing agreement with individual associated persons, FCM s, or IB s in return for raising assets. This arrangement will pay the outside entity a share of the fees generated. CCM will NOT charge any extra fees to an account placed by an outside party. CCM is not involved in or responsible for any extra commissions or fees charged to the account by the outside party. CCM does not receive and is not entitled to receive a share in any commissions paid to any FCM or Introducing Broker (IB) or any principal thereof in connection with the establishment or continuation of a client's account with such FCM or IB. The size of the account may result in different commission levels for different clients within the same FCM. CCM's proprietary accounts may pay lower commission rates. Clients are free to select the FCM or IB of their choice; however, CCM will control the selection of the executing broker and the client will be responsible for any "give up" fees. Said give up fees may be as much as $1-$25 round-turn per contract. Administrative, Civil, or Criminal Actions There have not been any administrative, civil, or criminal actions against CCM or its principals at any time preceding the date of this disclosure document. Privacy Policy Covenant Capital Management obtains nonpublic personal information about clients from their account documentation as well as in the course of processing redemption requests. None of such information is disclosed except as necessary in the course of processing subscriptions and redemptions and otherwise administering or trading the account without express consent of the client. 15

16 1. CCM obtains names, addresses, social security numbers, financial information, investing history as well as account numbers, account sizes, and account performance as well as other sensitive personal information. 2. Paper and electronic documents are held in the offices of CCM, which are reasonably protected from intruders. Only officers and employees of CCM have access to this information. Past Trading Performance The past performance of customer accounts traded by CCM is displayed beginning on page 17. CCM trades proprietary assets under the same system and same fee structure as client assets. Proprietary results are found beginning on page 21. The past performance of the Aggressive Program is found on page 18. Past performance for the Optimal Program is on pages 20 and 22. Past performance for the Long Commodity Program is found on page 19. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS (Remainder of page left intentionally blank) 16

17 PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS ORIGINAL PROGRAM-CUSTOMER PAST PERFORMANCE Name of CTA: Covenant Capital Management of Tennessee, LLC Trading program: Original Program Management of customer funds: September 1, 1999 Program: September 1, 1999 Number of customer accounts in this program as of 3/31/10: 16 Number of customer accounts managed by CTA as of 3/31/10: 28 Total customer assets under management as of 3/31/10: $180,740, Customer assets under management excluding notional as of 3/31/10: $18,745, Customer assets under trading program as of 3/31/10: $25,432, Customer assets excluding notional under trading program as of 3/31/10: $8,829, In the past five years: Largest monthly drawdown 1 : August % Worst peak-to-valley drawdown 2 : 2/06-3/ % Lifetime: Largest monthly drawdown: November % Worst peak-to-valley drawdown: 11/00-1/ % Number of profitable accounts that have opened and closed: 14 Range of returns experienced by profitable accounts; % to +0.41% Number of unprofitable accounts that have opened and closed: 6 Range of returns experienced by unprofitable accounts: % to 0.88% Month Jan -2.49% 3.82% -4.02% 2.51% 1.93% Feb 11.14% -4.28% 0.18% 15.41% 0.76% -.98 Mar 0.57% 0.52% -6.02% -4.39% -2.86% Apr 1.09% 0.37% 5.07% 3.29% 1.58% May 2.20% -5.15% 0.49% 2.84% 5.14% Jun -1.36% -1.22% -0.35% 4.78% -2.56% Jul 3.44% -2.03% 2.02% -4.59% 1.65 Aug 2.19% 0.32% -6.07% -3.79% 6.65 Sep 7.59% 0.08% 7.43% 0.09% 1.88 Oct -0.21% 1.84% 4.76% 3.01% Nov 6.46% 0.79% -0.67% 0.32% 8.14 Dec 4.71% 1.40% -0.90% -0.27% Annual 40.49% -3.83% 0.93% 19.20% 15.49% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS 1 Largest monthly drawdown is the largest loss experienced in any calendar month expressed as a percentage of total equity in the composite of accounts. 2 Worst peak-to-valley drawdown is the percentage decline at month end (after eliminating deposits and withdrawals) from any month end asset value without such value being exceeded as of a subsequent month end. 17

18 PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS AGGRESSIVE PROGRAM-CUSTOMER PAST PERFORMANCE Name of CTA: Covenant Capital Management of Tennessee, LLC Trading program: Aggressive Program Inception date: September 1, 1999 Program: January 15, 2004 Number of customer accounts in this program as of 3/31/10: 9 Number of customer accounts managed by CTA as of 3/31/10: 28 Total customer assets under management as of 3/31/10: $180,740, Customer assets under management excluding notional as of 3/31/10: $18,745, Customer assets under trading program as of 3/31/10: $4,779, Customer assets excluding notional under trading program as of 3/31/10: $3,329, In the past five years: Largest monthly drawdown 3 : March; Aug % Worst peak-to-valley drawdown 4 : 2/06-3/ % Lifetime: Largest monthly drawdown: March; Aug % Worst peak-to-valley drawdown: 2/06-3/ % Number of profitable accounts that have opened and closed: 0 Range of returns experienced by profitable accounts: NA Number of unprofitable accounts that have opened and closed: 1 Range of returns experienced by unprofitable accounts: -4.40% Monthly and annual rates of return: Month Jan -2.77% 8.49% -4.70% 5.26% Feb 17.12% -6.77% 0.81% 21.53% Mar 2.19% 0.57% -9.69% -5.01% Apr 2.85% 0.04% 8.50% 3.92% 2.82 May 6.19% -8.71% 0.60% 3.83% 9.06 Jun 0.97% -0.92% 0.45% 6.38% Jul 3.84% -1.94% 3.66% -7.46% 1.89 Aug 3.72% 0.40% -9.69% -5.42% Sep 9.36% 0.65% 12.42% 0.80% 3.40 Oct -0.78% 3.36% 6.15% 3.40% Nov 14.15% 1.36% -0.03% 0.49% Dec 10.12% 4.15% -2.02% -0.24% Annual 88.55% -0.47% 4.10% 27.58% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS 3 Largest monthly drawdown is the largest loss experienced in any calendar month expressed as a percentage of total equity in the composite of accounts. 4 Worst peak-to-valley drawdown is the percentage decline at month end (after eliminating deposits and withdrawals) from any month end asset value without such value being exceeded as of a subsequent month end. 18

19 PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS LONG COMMODITY PROGRAM-CUSTOMER PAST PERFORMANCE Name of CTA: Covenant Capital Management of Tennessee, LLC Trading program: Long Commodity Program Inception date: September 1, 1999 Program: March 1, 2009 Number of accounts in this program as of 3/31/10: 3 Number of accounts managed by CTA as of 3/31/10: 28 Total customer assets under management as of 3/31/10: $180,740, Customer assets under management excluding notional as of 3/31/10: $18,745, Customer assets under trading program as of 3/31/10: $150,528, Customer assets excluding notional under trading program as of 3/31/10: $6,587, In the past five years: Largest monthly drawdown 5 : 1/ % Worst peak-to-valley drawdown 6 : 11/2009-current -7.83% Lifetime: Largest monthly drawdown 7 : 1/ % Worst peak-to-valley drawdown 8 : 11/2009-current -7.83% Number of profitable accounts that have opened and closed: 0 Range of returns experienced by profitable accounts: NA Number of unprofitable accounts that have opened and closed: 0 Range of returns experienced by unprofitable accounts: NA Monthly and annual rates of return: Month Jan -% Feb -% Mar 0.07% Apr 0.33% May 5.89% Jun -2.90% Jul -0.24% Aug -0.32% Sep 1.64% Oct % Nov 5.79-% Dec -2.75% Annual 6.90% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS 5 Largest monthly drawdown is the largest loss experienced in any calendar month expressed as a percentage of total equity in the composite of accounts. 6 Worst peak-to-valley drawdown is the percentage decline at month end (after eliminating deposits and withdrawals) from any month end asset value without such value being exceeded as of a subsequent month end. 7 Largest monthly drawdown is the largest loss experienced in any calendar month expressed as a percentage of total equity in the composite of accounts. 8 Worst peak-to-valley drawdown is the percentage decline at month end (after eliminating deposits and withdrawals) from any month end asset value without such value being exceeded as of a subsequent month end. 19

20 PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS OPTIMAL PROGRAM-CUSTOMER PAST PERFORMANCE Name of CTA: Covenant Capital Management of Tennessee, LLC Trading program: Optimal Program Inception date: September 1, 1999 Program: May 1, 2008 Number of accounts in this program as of 3/31/10: 0 Number of accounts managed by CTA as of 3/31/10: 28 Total customer assets under management as of 3/31/10: $180,740, Customer assets under management excluding notional as of 3/31/10: $18,745, Customer assets under trading program as of 3/31/10: 0 Customer assets excluding notional under trading program as of 3/31/10: 0 In the past five years: Largest monthly drawdown 9 : 06/ % Worst peak-to-valley drawdown 10 : 05/ / % Lifetime: Largest monthly drawdown: 05/ / % Worst peak-to-valley drawdown: 06/ % Number of profitable accounts that have opened and closed: 1 Range of returns experienced by profitable accounts: Number of unprofitable accounts that have opened and closed: 0 Range of returns experienced by unprofitable accounts: NA Monthly and annual rates of return: Month 2008 Jan -% Feb -% Mar -% Apr -% May 0.95% Jun -3.93% Jul 2.56% Aug -1.74% Sep 3.73% Oct 7.19% Nov 1.02% Dec 1.35% Annual 11.29% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS 9 Largest monthly drawdown is the largest loss experienced in any calendar month expressed as a percentage of total equity in the composite of accounts. 10 Worst peak-to-valley drawdown is the percentage decline at month end (after eliminating deposits and withdrawals) from any month end asset value without such value being exceeded as of a subsequent month end. 20

21 PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS ORIGINAL PROGRAM-PROPRIETARY PAST PERFORMANCE Name of CTA: Covenant Capital Management of Tennessee, LLC Trading program: Original Inception date: September 1, 1999 Program: September 1, 1999 Number of proprietary accounts in this program as of 3/31/10: 1 Number of proprietary accounts managed by CTA as of 3/31/10: 2 Proprietary assets under management as of 3/31/10: 2,384, Proprietary assets under management excluding notional as of 3/31/10: $1,684, Proprietary assets under trading program as of 3/31/10: $2,133, Proprietary assets excluding notional under trading program as of 3/31/10: $1,433, In the past five years: Largest monthly drawdown 11 : March Worst peak-to-valley drawdown 12 : 1/06-3/ % Lifetime: Largest monthly drawdown: November % Worst-peak-to-valley drawdown: 6/01-1/ % Number of profitable proprietary accounts that have opened and closed: 0 Range of returns experienced by profitable accounts : NA Number of unprofitable accounts that have opened and closed: 1 Range of returns experienced by unprofitable accounts: 12.11% to 12.11% Monthly and annual rates of return: Month Jan -2.64% 7.02% -4.22% 2.22% 1.91% Feb 11.91% -4.66% 0.13% 15.28% 0.87% Mar 2.41% 1.04% -6.58% -4.80% -3.03% Apr 2.04% 0.28% 5.19% 3.10% 1.54% May 3.51% -6.29% 0.54% 2.63% 5.50% Jun 0.82% -1.23% -0.16% 4.35% -2.38% Jul 2.16% -2.23% 1.98% -4.65% 1.38% Aug 2.66% 0.40% -5.81% -4.30% 6.85% Sep 6.80% -0.01% 8.44% -0.30% 1.38% Oct -0.71% 2.08% 5.38% 2.35% -5.53% Nov 10.35% 1.05% -1.09% 0.34% 7.76% Dec 7.52% 1.80% -0.28% 0.13% -1.40% Annual 56.78% -1.37% 2.41% 15.72% 14.92% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS 11 Largest monthly drawdown is the largest loss experienced in any calendar month expressed as a percentage of total equity in the composite of accounts. 12 Worst peak-to-valley drawdown is the percentage decline at month end (after eliminating deposits and withdrawals) from any month end asset value without such value being exceeded as of a subsequent month end. 21

22 PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS OPTIMAL PROGRAM-PROPRIETARY PAST PERFORMANCE Name of CTA: Covenant Capital Management of Tennessee, LLC Trading program: Optimal Inception date: September 1, 1999 Program: August 1, 2006 Number of proprietary accounts in this program as of 3/31/10: 1 Number of proprietary accounts managed by CTA as of 3/31/10: 2 Proprietary assets under management as of 3/31/10: 2,384, Proprietary assets under management excluding notional as of 3/31/10: 1,684, Proprietary assets under trading program as of 3/31/10: 251, Proprietary assets excluding notional under trading program as of 3/31/10:251, In the past five years: Largest monthly drawdown 13 : Oct % Worst peak-to-valley drawdown 14 : 9/ / % Lifetime: Largest monthly drawdown 15 : Oct % Worst peak-to-valley drawdown 16 : 9/ / % Number of profitable accounts that have opened and closed: 0 Range of returns experienced by profitable accounts: NA Number of unprofitable accounts that have opened and closed: 0 Range of returns experienced by unprofitable accounts: NA Monthly and annual rates of return: Month Jan % 0.33% 7.19% Feb % 16.11% 3.31% Mar % -6.76% % Apr % 6.42% 8.98% May % 5.78% 25.24% Jun % 6.14% % Jul % -4.51% 1.36% Aug -0.38% -8.82% -7.49% Sep -0.54% 8.94% 1.52% Oct 2.65% 7.10% 7.98% Nov -0.90% -2.26% 1.29% Dec 3.74% -0.10% -1.43% Annual 4.56% -0.10% 25.48% 65.20% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS 13 Largest monthly drawdown is the largest loss experienced in any calendar month expressed as a percentage of total equity in the composite of accounts. 14 Worst peak-to-valley drawdown is the percentage decline at month end (after eliminating deposits and withdrawals) from any month end asset value without such value being exceeded as of a subsequent month end. 15 Largest monthly drawdown is the largest loss experienced in any calendar month expressed as a percentage of total equity in the composite of accounts. 16 Worst peak-to-valley drawdown is the percentage decline at month end (after eliminating deposits and withdrawals) from any month end asset value without such value being exceeded as of a subsequent month end. 22