Investment strategy for consistent high returns and low risk. Ideal for financial markets that have high volatility and no definite trend. In operation since October 2010, yielding a consistent return of +/-2% per month.

1. Investment strategy in an era of
high volatility and no market direction

2. Timing is everything
versus
timing is worthless
With almost every indicator
positively correlated, the
timing of buying and selling
securities demands a new
investment decision
strategy.
If all indicators are bullish
we can definitively state that
there is a very high
probability that they will
turn bearish, we just cannot
say when.

3. Trend lines go nowhere.
Performance tanks but

claims persist.
I
In this market every
strategy based on
predictive behaviour of
the market is doing
relatively poorly and at
the same time every
portfolio manager has
an index to measure
themselves favourably
against.

4.  You are not in safe hands
The safe nest of
capital preservation is
cracked
The era of buy quality
assets and hold is over.
To maintain asset value
above the rate of inflation
demands an investment
strategy that was
previously defined as
‘excessively risky’.
To sit and wait for the
market to stabilize and
regain a firm secular
bullish trend is the new
’risk’.

5. Hedge funds not on a
roll
The hedge funds have not
performed well
Complexity of structured
products have not yielded
any market advantage
Multi-Strategy Hedge fund
Index for 2011 was under
water

6. A redefinition of risk
and uncertainty
As systems evolve, they get
more complex. (WTO, Euro
currency zone, BRICS)
As systems become more
complex they become more
unstable
As systems become more
unstable the components of
the system must become
more flexible
Therefore, new flexible
strategies are needed

7. A new investment
strategy  An Iterative strategy
Technical trading will strate
not work.
Looking for trends will
only frustrate
Sitting on cash will
result in loses to
inflation.
Let the market come to
you. Find appropriate
strategies for particular
moments.

8. Make a series of short
term decisions
Do Not: hold
cash, predict the
economy, identify the next
disaster, chase the
market, follow the
cash, panic and/or despair.
DO develop strategies
that exploit volatility in a
no direction market and
protects your portfolio
from unnecessary risk. Be
liquid and ready for the
return of a secular boom.

9. RBC auto-callable
Notes are the
foundation investment
What are the  RBC Auto-Callable Phoenix Notes:
features of these bank issued equity linked notes that are
not principal protected. They represent
bonds? senior, uninsured deposit obligations of
the Royal Bank of Canada.
 Coupon payments, monthly or quarterly
 Automatically callable at observation
periods depending on the performance of
the underlying assets
 Conditionally principal protected at
maturity

10. WOF Phoenix how
does it operate?
Please open your first hand out

11. Step 1: Select the
appropriate Bond
1: single , pairs, triples or
composite
2: term ; 8 months, year
18 months, or longer
3: coupon rate 10 to 20 %
4: floor: 50% to 80%
5. benchmark dates:
monthly quarterly,
6: redemption terms;
R
cash or kind

e
p
r
e
s
e
n
t

12. Three year range  Rim ( red) is rejected
analysis of target Blue  AAPL,WFC,MSFT,APPL,JPM
chip stocks
,GE,FCX,,CAT, AMZN, KO ,
VALE, PBR are accepted

13. Step 2: Multiple
purchases of WOF
callable Phoenix bonds
Guidelines :
1. Avoid duplication
2. Vary call dates and
terms
3. Diversify sectors
4. Include complements
in pairs or triplets
5. Purchase monthly
6. Diversify into
international markets


14. Step 3: Acquire leverage
from bank using WOF  Bank leverage
Phoenix contract as
collateral
In order to increase the
rate of return, a
leveraging exercise is
critical.
Leveraged debt creates
currency hedge

15. Step 4: Use call spread option
strategy to exploit volatility to
maximize monthly return
Monthly/quarterly return
on portfolio of bonds assured
if contract above floor on
measurement day
If any stock is under water
as it approaches
measurement moment, an
option spread strategy is
implemented, to maximize
returns.
Option spread contract
collapsed once monthly
measurement date is passed
or wait until contract expires.

16.  Negative Correlates
Step 5: Minimize risk of
capital loss at maturity of
WOF bond
As long as stock price at
maturity is above floor, 100%
capital returned
If stock is below
floor, purchase options of
negative correlate to cover
the potential loss at maturity
If market is in bear
cycle, then determine the
best fit; (gold, VIX
TBs, Euro/US) to include in
option purchase. Objective to
lose no more than 50% of
potential loss upon maturity.

17. BoB’s performance
since January 2011
Please open your second hand out

18. % Away % Away Initial Final
Periodic Barrier From Barrier From Valuation Valuation
Description $ Invested Yield Stock 1 Initial Price LAST Price Barrier Stock 2 Initial Price LAST Price Barrier Date Date Settlement
WFC/MSFT 2 yr Monthly pay
70% barrier $ 250,000 1.22% WFC-us $ 31.81 $ 28.59 $ 22.27 20% MSFT-us $ 28.47 $ 27.47 $ 19.93 26% 19-Jan-11 22-Jan-13 Cash
APPL/JPM 6mnth Monthly pay CLOSED
80% barrier $ 100,000 1.35% AAPL-us $ 342.62 $ 414.54 $ 274.10 41% JPM-us $ 45.96 $ 34.78 $ 36.77 -4% 23-Feb-11 8/23/2011 Physical
SLB/POT 1 yr Monthly pay 65%
barrier $ 100,000 1.02% SLB-us $ 93.26 $ 68.20 $ 60.62 8% POT-us $ 58.93 $ 43.44 $ 38.30 9% 31-Mar-11 02-Apr-12 Cash/Physical
GE/FCX 1 yr Monthly pay 70%
barrier $ 100,000 1.55% GE-us $ 20.53 $ 18.40 $ 14.37 20% FCX-us $ 55.77 $ 39.24 $ 39.04 0% 04-Apr-11 04-Apr-12 Cash/Physical
CAT/AMZN 1 yr Monthly pay 70%
barrier $ 100,000 1.30% CAT-us $ 108.85 $ 94.64 $ 76.20 17% AMZN-us $ 185.42 $ 175.85 $ 129.79 25% 25-Apr-11 25-Apr-12 Cash/Physical
GDX/KO 1 yr Monthly pay 65% CLOSED
barrier $ 100,000 0.95% GDX-us $ 60.27 $ 64.11 $ 39.18 41% KO-us $ 68.17 $ 71.23 $ 44.31 39% 16-Aug-11 09/16/2011 Cash/Physical
VALE/PBR 1 yr Monthly pay 70% Closed
barrier $ 100,000 2.50% VALE-us $ 23.87 $ 25.41 $ 16.71 36% PBR-us $ 23.30 $ 27.01 $ 16.31 46% 29-Sep-11 10/31/2011 Cash/Physical
VALE/PBR 1 yr Monthly pay 70%
barrier $ 100,000 2.29% VALE-us $ 24.61 $ 22.86 $ 17.23 23% PBR-us $ 26.17 $ 26.23 $ 18.32 30% 01-Nov-11 16-Nov-12 Cash/Physical
AAPL 18mnth Quarterly pay 70%
barrier $ 100,000 3.25% AAPL-us $ 366.99 $ 414.54 $ 256.89 43% 23-Nov-11 23-May-13 Cash/Physical

19. Total
Initial Price Last Price Spent/Rec Current
# per per eived on Value of Gain % Gain Total Gain Expiration
Hedges $ Invested Contracts Ticker Contract Contract Hedge Hedge (Loss) (Loss) (Loss) Date Settlement
Lloyd Baron Hedge: 15 US Treasuries (TLT)
1 #8120176022 Sept. $100 strike Calls $ 9,150 15 TLT1117I100-US 6.10 $ 10.45 $ 9,150 $ 15,675 $
$ 4.35 71% $ 6,525 16-Sep-11 Cash
Lloyd Baron Hedge: 5 Gold (GLD-us) Sept
2 #8120176022 $160 strike Calls $ 5,500 5 GLD1117I160-US11.00 $ 21.60 $ 5,500 $ 10,800 $ 10.60
$ 96% $ 5,300 16-Sep-11 Cash
Subtotal: $ 14,650 $ 14,650 $ 26,475 $ 11,825
Lloyd Baron Hedge: Sold 10 FCX-us October
3 #8120176022 36 strike Calls $ 1,000 (10) FCX1122J36-US 1.00 $
$ 0.29 $ 1,000 $ 290 $ 0.71 71% $ 710 21-Oct-11 Cash
Lloyd Baron Hedge: Bought 10 FCX-us
4 #8120176022 October 40 strike Calls $ (300) 10 FCX1122J40-US 0.30 $
$ - $ (300) $ - $ (0.30) -100% $ (300) 21-Oct-11 Cash
Subtotal: $ 700 $ 700 $ 290 $ 410
Lloyd Baron Hedge: Sold 10 FCX-us November
5 #8120176022 37 strike Calls $ 1,830 (10) FCX1119K37-US 1.83 $
$ - $ 1,830 $ - $ 1.83 100% $ 1,830 18-Nov-11 Cash
Lloyd Baron Hedge: Bought 10 FCX-us
6 #8120176022 November 40 strike Calls $ (730) 10 FCX1119K40-US 0.73 $
$ - $ (730) $ - $ (0.73) -100% $ (730) 18-Nov-11 Cash
Subtotal: $ 1,100 $ 1,100 $ - $ 1,100
Lloyd Baron Hedge: Sold 10 FCX-us
7 #8120176022 December 37 strike Calls $ 1,101 (10) FCX1117L37-US 1.10 $
$ 0.75 $ 1,101 $ 750 $ 0.35 32% $ 351 17-Dec-11 Cash
Lloyd Baron Hedge: Bought 10 FCX-us
8 #8120176022 December 40 strike Calls $ (361) 10 FCX1117L40-US 0.36 $
$ 0.01 $ (361) $ (10) $ (0.35) -97% $ (351) 17-Dec-11 Cash
Subtotal: $ 740 $ 740 $ 740 $ -
Lloyd Baron Hedge: Sold 10 FCX-us January
9 #8120176022 37.50 strike Calls $ 1,800 (10) FCX1221A37.5-US1.80 $
$ 2.42 $ 1,800 $ 2,420 $ (0.62) -34% $ (620) 21-Jan-12 Cash
Lloyd Baron Hedge: Bought 10 FCX-us
10 #8120176022 January 39.50 strike Calls $ (940) 10 FCX1221A39.5-US0.94 $
$ 1.14 $ (940) $ (1,140) $ 0.20 21% $ 200 21-Jan-12 Cash
Subtotal: $ 860 $ 860 $ 1,280 $ (420)

20. Interest
Payments
Client Description Received Interest Periods:
Total: Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12
Horizon Pacific
International WFC/MSFT 2 yr Monthly pay
#8120176428 70% barrier $ 36,600 $ 3,050 $ 3,050 $ 3,050 $ 3,050 $ 3,050 $ 3,050 $ 3,050 $ 3,050 $ 3,050 $ 3,050 $ 3,050 $ 3,050
Lloyd Baron APPL/JPM 6mnth Monthly pay
#8120176022 80% barrier $ 8,100 $ 1,350 $ 1,350 $ 1,350 $ 1,350 $ 1,350 $ 1,350
Lloyd Baron SLB/POT 1 yr Monthly pay 65%
#8120176022 barrier $ 8,160 $ 1,020 $ 1,020 $ 1,020 $ 1,020 $ 1,020 $ 1,020 $ 1,020 $ 1,020
Lloyd Baron GE/FCX 1 yr Monthly pay 70%
#8120176022 barrier $ 12,400 $ 1,550 $ 1,550 $ 1,550 $ 1,550 $ 1,550 $ 1,550 $ 1,550 $ 1,550
Lloyd Baron CAT/AMZN 1 yr Monthly pay 70%
#8120176022 barrier $ 10,400 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300
Lloyd Baron GDX/KO 1 yr Monthly pay 65%
#8120176022 barrier $ 950 $ 950
Lloyd Baron VALE/PBR 1 yr Monthly pay 70%
#8120176022 barrier $ 2,500 $ 2,500
Lloyd Baron
#8120176022 $ 4,580 $ 2,290 $ 2,290
Lloyd Baron AAPL 18mnth Quarterly pay 70%
#8120176022 barrier $ -
Sub Total Revenue: $ 83,690 $ 3,050 $ 4,400 $ 4,400 $ 6,970 $ 8,270 $ 8,270 $ 8,270 $ 7,870 $ 4,350 $ 9,420 $ 9,210 $ 9,210

21.  Projection for 2012-2013

22. Objective: to create a
$12 million BoB fund  Prescription for Expansion
Benefits:
Choose bonds in primary
market
Diversify to targeted blue
chip stocks
Create new flexible contracts
with specific parameters
Lower commission fees
Generate higher profits