Mid Year

Investment Strategy
 Mid Year Outlook Conference Call
CONFIDENTIAL INFORMATION

Conference Dial-In Number: (218) 339-3600

Participant Access Code: 722682#

Conference Playback Number: (218) 339-3699

Access Code: 722682#

Wednesday, June 30th, 2010

The call will begin promptly at 11:00AM EDT
Economic
Outlook
 Consensus Already Pricing V-Shaped Recovery
CONFIDENTIAL INFORMATION

Rose colored
glasses?

Source: Hussman Funds

Economic Outlook | 4
 Expectations Are Irrationally Exuberant
CONFIDENTIAL INFORMATION

“The economy -- supported by stimulative monetary policy and the concerted

efforts of policymakers to stabilize the financial system -- appears to be on
track to continue to expand through this year and next.

“The latest economic projections of Federal Reserve Governors and Reserve

Bank presidents anticipate that real gross domestic product (GDP) will grow
in the neighborhood of 3-1/2 percent over the course of 2010 as a whole and
at a somewhat faster pace next year.”

-Federal Reserve Chairman Ben Bernanke’s Testimony,

Before the U.S. House of Representatives Budget Committee, June 9 2010

Economic Outlook | 5
 Where Have We Heard This Before?
CONFIDENTIAL INFORMATION

“The impact on the broader economy and financial markets of the problems
in the subprime market seems likely to be contained.”
-Federal Reserve Chairman Ben Bernanke
Testimony to Joint Economic Committee, March 2007

“The U.S. economy appears likely to expand at a moderate pace over the
second half of 2007, with growth then strengthening a bit in 2008 to a rate
close to the economy’s underlying trend.”

-Federal Reserve Chairman Ben Bernanke

Semi-Annual Testimony to Congress, July 2007

Economic Outlook | 6
 The “Hostess Twinkie” Recovery
CONFIDENTIAL INFORMATION

Unsustainable
deficit spending

Source: Saint Louis Federal Reserve

Economic Outlook | 7
 Leading Indicators are Rolling . . .
CONFIDENTIAL INFORMATION

Back in recession
territory

Source: Gluskin Sheff

Economic Outlook | 8
 Rolling . . .
CONFIDENTIAL INFORMATION

Source: Pragmatic Capitalism

Economic Outlook | 9
 Rolling.
CONFIDENTIAL INFORMATION

Source: Pragmatic Capitalism

Economic Outlook | 10
 Amidst A Number of Disturbing Developments:
CONFIDENTIAL INFORMATION

 Second wave of mortgage resets and domestic credit strains

 Eurozone contagion and sovereign debt concerns
 Global credit conditions rapidly deteriorating
 Consequences of Deepwater Horizon spill
 Tensions between North and South Korea
 German ban on short selling
 Australia’s 40% mining tax
 Australia housing bubble
 Chinese property bubble
 European bank failures
 US financial regulation
 Rising correlations
 Thailand riots
 Flash crash?

Economic Outlook | 11
 The Second Wave
CONFIDENTIAL INFORMATION

Mountain of
adjustable resets

Source: Credit Suisse

Economic Outlook | 12
 Problem Children
CONFIDENTIAL INFORMATION

Source: Der Spiegel

Economic Outlook | 13
 Global Markets Are Interconnected
CONFIDENTIAL INFORMATION

Source: BIS Quarterly Review, June 2010

Economic Outlook | 14
 Too Big to Bail
CONFIDENTIAL INFORMATION

700%
Top 25 Global Banks: Total Assets to Home Country GDP
594%
600%

500%

400%
337%

300%
237%

200% 180%
155%

101% 103% 92%

100% 83% 84%
56%

0%

Source: JPMorgan
Economic Outlook | 15
 Eurozone Liquidity
CONFIDENTIAL INFORMATION

Source: Hedgeye Risk Management

Economic Outlook | 16
 Double Trouble
CONFIDENTIAL INFORMATION

Chinese Property Value/Disposable Long Term Real House Prices

Income Per Urban Household

Is this a
bubble?

Source: GMO, Steve Keen’s Debtwatch

Economic Outlook | 17
 Investment
Implications
 Our Investment Process
CONFIDENTIAL INFORMATION

• Global Macro is critical to understanding capital markets.

Macro

• Fundamental Value drives long term returns.

Valuation

• Market Action complements long term value.

Sentiment

Portfolio
• Disciplined Portfolio Construction is vital to consistent alpha.
Construction

Investment Implications | 19
 It’s A Whole Different World Out There!
CONFIDENTIAL INFORMATION

2009 2010

Cash is Trash Cash is King

Reflation Deflation

Rebound in LEI Declining LEI

Beta Outperformance Quality Outperformance

Declining Volatility Increasing Volatility

Rising Interest Rates Declining Interest Rates

Steepening Yield Curve Flattening Yield Curve

Investment Implications | 20
 Investors Should Own Quality
CONFIDENTIAL INFORMATION

Projected Annual Real Return Over 7 years

8.0%
7.0%
7.0%
Annual Real Return Over 7 years

6.5% Long-Term
6.0%
Historical U.S. Equity

5.0%
Above average
4.0%
returns from low
3.0% risk equities.
2.0% 1.9%

1.0%

0.0%

-0.6%
-1.0%
U.S. Equities (Large Cap) U.S. Equities (Small Cap) U.S. High Quality

Source: GMO 7-Year Asset Class Return Forecasts

Investment Implications | 21
 After a Peak in Leading Indicators . . .
CONFIDENTIAL INFORMATION

50.0%

40.0%
You are
30.0%
34.5%
here!!
20.0%

15.8%
10.0%

1.2% Profitability
0.0%
Beta Equity Firm
-10.0%
Valuation Valuation -14.3%

-20.0%
Early Expansion Late Expansion Early Contraction Late Contraction

Annualized Equity Returns During Market-Cylce Phase (L)

Source: ISI Portfolio Strategy

Investment Implications | 22
 While The Cycle Looks Grim.
CONFIDENTIAL INFORMATION

We are entering the worst two

quarters of the cycle, where
returns have been dramatically
worse than indicated here
when starting from stretched
valuations, as we see today.

Source: Hussman Funds

Investment Implications | 23
 Inflation Is Public Enemy Number One . . .
CONFIDENTIAL INFORMATION

Source: Saint Louis Federal Reserve

Investment Implications | 24
 But Deflation Is The Greater Evil Today!
CONFIDENTIAL INFORMATION

The inflationistas are focusing solely on the increase

in the monetary base, which tells us nothing if
money is not moving through the system!!

Source: ShadowStats.com
Investment Implications | 25
 Core CPI Remains at Lowest Level Since 1966 . . .
CONFIDENTIAL INFORMATION

Dónde está
inflation?

Source: Bespoke Group

Investment Implications | 26
 Bond Yields Follow Inflation Lower . . .
CONFIDENTIAL INFORMATION

Long term treasury

rates fell to 1.9% in 1941

Source: Hoisington Investment Management

Investment Implications | 27
 So Should Commodities . . .
CONFIDENTIAL INFORMATION

China is the second worst

performing equity market on
the planet year-to-date
(between Greece and Spain).

Source: Gluskin Sheff

Investment Implications | 28
 And Commodity Currencies.
CONFIDENTIAL INFORMATION

Source: Decision Point

Investment Implications | 29
 Don’t Discount The Almighty Buck!!
CONFIDENTIAL INFORMATION

Fiat currencies are engaged in a

dangerous game of competitive
devaluation. History warns that
this will not end well, but the
Greenback is still the tallest
midget in the room . . . for now.

Investment Implications | 30
 Gold Is Not a Bubble . . . Yet!
CONFIDENTIAL INFORMATION

Prior Secular Bull Markets

(Trough-to-Peak Percent Change)
Nasdaq 1324%

S&P 500 1317%

Bond Prices 1241%

Homebuilding Index 954%

WTI 882%

Hang Seng 665%

Dow Transports 529%

Japan Land Prices* 467%

Nikkei 463%

Gold 389%

0% 200% 400% 600% 800% 1000% 1200% 1400%

Source: Clusterstock
Investment Implications | 31
 Broyhill’s Bottom Line
CONFIDENTIAL INFORMATION

Buckle your seatbelts kids. We are headed for a bumpy ride ahead. We are
positioned accordingly, as the Great Recovery appears to be a big fat
D.U.D.D.
 Double Dip in the economy and in domestic home prices as we pass the
peak effects of monetary policy and fiscal stimulus at the same time the
inventory bounce begins to fade ahead of major tax increases next year.

 Unemployment is structural in nature and rises on average for five years

following systemic banking crises. The “boost” from census hiring is now
in the rear view mirror.

 Debt levels across the private and public sectors have reached a choking
point, in which greater levels of debt act as larger and larger speed bumps
for economic growth.

 Deflation in asset prices (particularly from today’s overvalued levels) is

the result of private sector deleveraging, which leads to distressed selling,
a loss of confidence and a further contraction in the velocity of money.

Investment Implications | 32
 Contact Information
CONFIDENTIAL INFORMATION

Broyhill Asset Management

800 Golfview Park
Post Office Box 500
Lenoir, NC 28645
Phone: 828 758 6100
Fax: 828 758 8919

For more information please contact:

Mr. Christopher R. Pavese, CFA

chris@broyhillasset.com

Contact Information | 33
 Disclosures
CONFIDENTIAL INFORMATION

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

This material has been prepared solely for the purposes of illustration and discussion. “Broyhill Asset Management” is the marketing name
for the investment management business conducted by Broyhill Asset Management, LLC. and its affiliates. Broyhill Asset Management, LLC
is an SEC Registered Investment Advisor. Private investment vehicles are offered through Broyhill Wakin General Partners LLC, Surety
Capital Management LLC, and Broyhill Strategic Partners LLC, and are only offered by delivery of confidential offering memorandum and
subscription materials to eligible investors who meet certain statutory and/or regulatory criteria. Each General Partner is a separate legal
entity and is affiliated with Broyhill Asset Management, LLC through common ownership and control.

Under no circumstances should the information contained herein be used or considered as an offer to sell, or solicitation of an offer to buy
any security. Any security offering is subject to certain investor eligibility criteria as detailed in the applicable offering documents. The
information contained herein is confidential and may not be reproduced or circulated in whole or in part. The information is in summary
form for convenience of presentation, it is not complete and should not be relied upon as such.

Any information, data, statement, opinions, or projections made herein may contain certain forward looking statements, projections, and
information that are based on the beliefs of Broyhill Asset Management as well as assumptions made by, and information currently available
to, Broyhill Asset Management. Such statements reflect the view of Broyhill Asset Management with respect to future events and are subject
to certain risks, uncertainties and assumptions (including, but not limited to, changes in general economic and business conditions, interest
rate and securities market fluctuations, competition from within and without the investment industry, new products and services in the
investment industry, changes in customer profiles, and changes in laws and regulations applicable to Broyhill Asset Management). Should
one or more of these other risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary
materially from those described herein.

All information, including performance information, has been prepared in good faith; there are no representations or warranty expresses or
implied, as to the accuracy or completeness, of the information, and nothing herein shall be relied upon as a promise or representation as to
the past or future performance. This material may include information that is based, in part or in full, on hypothetical assumptions, models,
and/or other analysis (which may not necessarily be described herein), no representations or warranty is made as to the reasonableness of
any such assumptions, models, or analysis. The information set forth herein was gathered from various sources which are believed, but not
guaranteed, to be reliable. Unless stated otherwise, any opinions expressed herein are current as of the date hereof and are subject to change
at any time. Accordingly, neither Broyhill Asset Management not its principals or affiliates make any representations as to the timeliness of
any information in this presentation.

Disclosures| 34