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1. Summary: The IPOX Indexes closed out the year with strong absolute and relative gains driven by big moves in recent IPOs not captured in benchmarks. With accessible/developed market IPO deal flow at a seasonal standstill, we look at the cross-sectional variation in IPOX Indexes and select IPOX-linked investment product performance.

2. IPOX Indexes Action: The IPOX Indexes rose sharply, playing catch up to what has been a steady deterioration in relative performance throughout the past weeks. The IPOX Global 100 Index (IPGL100), global IPO and spin-off performance barometer, rose +1.71%, sharply outperforming the major indexes into year-end. With the exception of the IPOX China and IPOX BRIC Indexes, all of the IPOX Indexes displayed significantly positive relative returns into year-end, underlying its asset allocation potential.

3. Analyst coverage leads to surge in General Motors: Big performance jumps in heavily-weighted recent IPOs not yet captured in the main benchmark indexes drove these strong returns: The highlight of the week was the big jump in IPOX heavyweight General Motors (GM US: +5.89%), which benefited from a slew of positive rating initiations from Tuesday. The IPOX Week had a lead here, suspecting a slew of positive grades to come in last Sunday’s edition. Recent Global Consumer Discretionary IPO Pandora A/S (PNDORA DC: +4.67%) and US Financial LPL Investment (LPLA US: +4.36%) also convinced.

4. IPOX Indexes 2010 Highlights – Key insights: The IPOX Indexes capturing IPOs and spin-offs with a dedicated domicile in a developed market (MSCI definition) continued to perform strongly: The outperformance was pervasive and underlines the potential of IPOX when seeking alternative risk-controlled developed markets exposure. The focus here was on the liquid and scalable IPOX Asia-Pacific 30 (IPTA: +28.13%) Portfolio which trounced all benchmarks. IPOX U.S. and IPOX Europe significantly beat benchmarks in 2010 as well.

2010: Offical IPOX Indexes Returns

Index

Ticker

2010 Price Return (%)

2010 Total Return (%)

Versus Benchmark

IPOX Global Composite Index

IPGLC

+10.25

+12.60

In Line

IPOX Global 100

IPGL100

+5.27

+7.67

Below

IPOX Global 50

IPGL50

+11.18

+13.65

Above

IPOX Global 30

IPGL30

+1.72

+4.29

Below

IPOX Global 30 (Developed)

WTD

+8.00

+9.72

In Line

IPOX U.S. 100

ETF: FPX

+17.27

+19.08

Above

IPOX U.S. 30

IPXT

+14.92

+16.99

Above

IPOX Europe 30

IXTE

+6.42

+9.02

Above

JP Morgan IPOX Europe 50

IPXUJPEU

+8.40

+11.20

Above

IPOX Emerging Market Composite

IPXUEM

+12.19

+14.59

In Line

IPOX BRIC 25

IPXUBRIC

+0.02

+2.50

Below

IPOX China Composite Index

IPXUCHCP

+2.87

+5.42

In Line

IPOX China 20

CNI

-8.40

-6.23

Below

IPOX China A Shares Composite Index

IPXUCHAP

-2.15

-0.37

Above

IPOX China A Shares 30

IPXUCAUP

-8.73

-7.06

In Line

IPOX Latin America Composite

IPXULATM

+25.65

+28.73

Above

IPOX Latin America 20

IPXULATT

+13.73

+16.67

Above

IPOX Asia-Pacific 30 (Developed)

IPTA

+28.13

+29.87

Above

5. IPOX-linked product performance - 2010 Summary: For long-only investors, the IPOX-linked First Trust U.S. IPO Fund (ETF FPX: +18.15%) has displayed powerful asset allocation properties since its inception in 2005, delivering an outperformance of around 500 bps p.a. at similar risk and exposure versus the S&P 500. While celebrating its 10-months anniversary with strong inflows, the IPOX-run Direxion Long/Short Global IPO Fund (DXIIX: +8.23%) has delivered competitive returns at a negative correlation and low risk vs. the benchmarks. With global IPO activity expected to reach (near)-record levels in 2011, and with big gyrations in the markets likely, the management team sees ample opportunities to continue to successfully execute its mandate.

2010: Comparative Performance of IPOX-linked Products: DXIIX and FPX

Ticker

2010 (%)

Beta

Correlation vs. SPX

Correlation vs. DXIIX

DXIIX

+8.28

0.21

-0.42

1.00

TFSMX

+6.23

0.53

0.90

-0.36

JPMNX

-0.90

0.37

0.44

-0.20

FMLSX

-9.41

0.71

0.96

-0.40

TSPEX

+5.41

0.50

0.70

-0.29

SPX

+12.78

1.00

1.00

-0.42

FPX

+18.15

0.99

0.87

-0.36

Source: IPOX Index 2010 Review