Astor Asset Management Portfolio Update and Q4 2007 Review

Market Update

In what turned out to be quite a volatile year, there have been very few constants amid much of the turmoil that has roiled the markets. A slowing global economy has been mitigated with central banks around the world injecting liquidity to ease credit and stimulate growth. Still equity markets have yet to be convinced that the liquidity that has been added thus far will be enough to stave off recession.

Portfolio Update

With volatility rising towards the end of the year and the credit crisis deepening, we took significant steps to protect portfolio assets and take advantage of what asset class expansion remained. We were successfully able to insulate the portfolios from the risks equities posed during the period, and are very pleased with our performance. As risks of recession rise, we will continue to look for opportunities in other indexes and asset classes around the globe that have reasonable valuations and strong growth prospects.

A GLANCE AT KEY ECONOMIC DATA OVER THE RECENT QUARTERS

The table above recaps some of the important elements to Astor’s economic model. GDP bounced back strongly in Q3, but looks very soft in the Q4 estimates. Job growth has also slowed over the period, and is now below the 6-month and 12-month moving average of the data. Money flows that were previously flowing strongly into equity indexes (Nasdaq, S&P 500) have dried up as the credit crisis deepened and the Fed moves were questioned.

EMPLOYMENT

The economic data surrounding jobs has officially caught up with the slowdown in business activity and housing that the U.S. has experienced in 2007. In fact, while gains in specific sectors like health care and leisure services have remained strong, construction and financial services jobs have consistently eroded over the course of the year. With the housing slump far from over, our model’s employment component is barely positive and is signifying that an employment recession could be shortly ahead.

GDP

Much like the equity markets, GDP has been all over the map when it comes to economic growth in various sectors of the economy. Coming off a second quarter that posted 3.8% growth, Q3’s number was even more impressive at 4.9%. However, with a problematic housing situation and very weak holiday shopping season due to concern over gas prices and employment, Q4 GDP is estimated to be less than 2%. Over the course of the year we have seen government spending pick up some of the slack left by the consumer which finally seems to be weakening after all these years. Future threats to consumer spending through more inflation or employment deterioration looks to impact GDP for the first couple quarters of 2008.

THE MARKETS (i.e. MOMENTUM INDICATOR)

Volatility in the equity and bond markets continued to rise as we completed largely due to weakening economic data and moves out of the Federal make their full impact. These moves will be effective, but we caution that work through the system. This, and a weakening employment picture, first quarter where both the Nasdaq and S&P 500 in nearly 2 years. shopping season, earnings expectations have been lowered and will pressure as we head into early 2008.

ACTIVE MANAGEMENT PHILOSOPHY

Astor Asset Management (Astor) believes the long-term financial goals for investors are capital appreciation, limited volatility, and quick recovery times from market losses. Astor believes these goals can be achieved by diversifying investments among various asset classes, using low-cost investment products, and adding style diversification. Astor utilizes effective tools, such as iShares and ETFs, to implement our portfolios, which are based on economic analysis. These portfolios effectively combine asset allocation and active management into a single account. The objective of each portfolio is to limit drawdowns and generate profits in virtually all market environments. The basis of our philosophy is identifying the recurring economic cycles of expansion, peak, contraction, and trough, and actively rebalancing (only) when the cycles change.

By analyzing macro-economic factors like employment, GDP, and fundamental indicators like money flows, valuations, as well as market price and momentum, we can achieve superior returns with less risk during various market conditions. Strategic asset allocation is utilized to create exposure to a variety of market sectors, capitalizations and styles. Our objective is to produce positive returns, not

SOME NUMBERS ON ACTIVE MANAGEMENT AND THE MARKETS

1 “Positive Quarters” is a comparison of positive performance in the Astor Style Preferred Growth Program and S&P 500 since 1997.
2 “Worst Drawdown” represents the worst loss experienced in the particular investment.
3 “Quarters to Recovery” indicates the time it takes to get back to even after the worst drawdown is experienced.