Brandywine Asset Management

Financial Futures

Brandywine Asset Management, Inc. ("Brandywine") is a research and trading firm engaged in the business of managing Client accounts in a broad range of international financial and commodity markets. This disclosure document describes those Programs offered by Brandywine that trade in futures contracts, options on futures contracts, forward contracts, cash currencies and other commodity interests traded in the interbank market and on United States and on non-United States exchanges and markets. (Referred to herein as Brandywine's "Managed Futures Programs" or "Trading Programs".) (The contracts traded in these Managed Futures Programs are hereinafter referred to collectively as "derivatives".) The President, principal and sole shareholder of Brandywine is Michael P. Dever. Mr. Dever has been actively researching and trading derivatives since 1979. He formed Brandywine as a Pennsylvania corporation when it first began managing Client assets pursuant to non-systematic (discretionary) trading methods in May 1982. The Brandywine Trading Programs were conceived of during the first decade of extensive discretionary trading by Mr. Dever. During that period he regularly observed, developed and cataloged hundreds of trading ideas and research techniques. By 1987 Mr. Dever realized that it would require a massive research project to combine all of his concepts together into one cohesive trading model. The project would entail combining Mr. Dever's trading experience in the international derivatives markets with specialized scientific, statistical and mathematical research skills. Begun in 1987, the initial phase of the project took four years and combined the talents of Brandywine's own in-house researchers and programmers with the specialized skills of more than one dozen academic researchers from three different Universities. Brandywine began trading pursuant to its 100% systematic Trading Model in January 1991, following the completion of this initial phase of research. Despite strong performance throughout the 1990’s, as a consequence of organizational changes within Brandywine in the late 1990’s, the program was substantially modified in 1999. Assets under management, which peaked at more than $160 million in 1997, fell to less than $1 million by 2002. The past performance of Brandywine’s futures trading prior to the launch of the programs described in this disclosure document is available upon request. In January 2004, Brandywine re-introduced its multi-strategy managed futures approach, trading in six programs: Diversified, Diversified Aggressive, Financial, Financial Aggressive, FX and FX Aggressive. In addition, Brandywine rededicated substantial resources to the ongoing development of its Trading Model. Brandywine’s Global Micro Approach Brandywine’s investment philosophy is based on the belief that the most consistent and persistent investment returns across all market environments are best achieved by combining multiple uncorrelated trading strategies - each designed to profit from a logical, distinct return driver - into a truly diversified and balanced investment portfolio. This approach is best described as Global Micro, Brandywine’s unique approach to bottoms-up futures trading, due to the fact that the Brandywine Managed Futures programs trade in a broad range of markets (Global) utilizing many independent, uncorrelated trading strategies. Each strategy-market combination is allocated a small (Micro) percentage of the risk capital of the account (generally less than ½ of 1%). Market Diversification Brandywine’s Diversified Futures programs trade in more than 80 individual markets and currency cross-rates. Brandywine’s proprietary portfolio allocation model is designed to dynamically readjust the allocations made to each market based on changes in each market’s volatility and correlation to the other markets in the portfolio. This ensures that an average move in any single market will not have a greater influence on the volatility of the portfolio than an average move in any of the other markets traded. Strategy Diversification In addition to market diversification across seven market sectors, Brandywine’s Global Micro approach is also defined by our proprietary multi-strategy portfolio allocation model, which balances trades across multiple independent trading strategies. This portfolio allocation model was developed in the late-1980’s, near the end of our first decade of trading, by Brandywine’s in-house staff in combination with outside researchers from three Universities. The model is designed to maintain balance among all trading strategies and markets so that each will, over time, have an equal impact on the Brandywine managed futures programs’ performances. A benefit of this balanced diversification is that, because of the reduction in account losses (relative to less diversified portfolios) and the profits consumed in recovering from them, portfolio performance can actually exceed the average performance of each of the trading strategies employed. Most importantly, this balance also reduces portfolio risk, especially the probability that any single external event will negatively impact all of the strategies. Brandywine has aggregated its trading strategies into six Strategy Types.