Order Routing

Rule 605:

Pali is not presently subject to the reporting requirements of Rule 605 based on the exemption issued by the SEC for Small Market Centers. According to Staff Legal Bulletin No. 12R dated June 22, 2001 this exemption covers any market center that reported fewer than 200 transactions per trading day on average over the preceding six month period in securities that are covered by the Rule (that is, national market system securities that do not qualify for the inactively traded security exemption), but only if more than 90% of such transactions were in securities that are not included in the Nasdaq-100 Index or the S&P 500 Composite Stock Price Index.

In addition to the exemption mentioned above, as Pali receives the bulk of its orders on a "not held" basis, Pali further relies on the special handling exclusion which defines covered orders specifically excludes "any order for which the customer requests special handling for execution, including, but not limited to, orders to be executed at a market opening price or a market closing price, orders submitted with stop prices, orders to be executed only at their full size, orders to be executed on a particular type of tick or bid, orders submitted on a "not held" basis, orders for other than regular settlement, and orders to be executed at prices unrelated to the market price of the security at the time of execution." Lastly with regards to Rule 605, Pali further relies on the "Exemption for Block Orders." As per Staff Legal Bulletin No.12R dated June 22, 2001, the SEC has exempted from Rule 605 any order with a size of 10,000 shares or greater. The majority of Pali's customer orders are for 10,000 or more shares.

Rule 606:

http://www.marketsystems.com/msi/reports/index.html?clientid=palc

Customer Identification Program Notice

Important Information You Need to Know about Opening a New Account

To help the government fight the funding of terrorism and money laundering activities, federal law requires financial institutions to obtain, verify, and record information that identifies each person who opens an account.

This Notice answers some questions about Pali's Customer Identification Program.

What types of information will I need to provide?

When you open an account, Pali is required to collect information such as the following from you:

• Your name
• Date of birth
• Address
• Identification number
• U.S. Citizen: taxpayer identification number (social security number or employer identification number)
• Non-U.S. Citizen: taxpayer identification number, passport number, and country of issuance, alien identification card number, or government-issued identification showing nationality, residence, and a photograph of you

You may also need to show your driver's license or other identifying documents.

A corporation, partnership, trust or other legal entity may need to provide other information, such as its principal place of business, local office, employer identification number, certified articles of incorporation, government-issued business license, a partnership agreement, or a trust agreement.

U.S. Department of the Treasury, Securities and Exchange Commission, NASD, and New York Stock Exchange rules already require you to provide most of this information. These rules also may require you to provide additional information, such as your net worth, annual income, occupation, employment information, investment experience and objectives, and risk tolerance.

What happens if I don't provide the information requested or my identity can't be verified?

Pali may not be able to open an account or carry out transactions for you. If Pali has already opened an account for you, we may have to close it.

We thank you for your patience and hope that you will support the financial industry's efforts to deny terrorists and money launderers access to America's financial system.

Margin Disclosure Statement

Pali Capital, Inc. is furnishing this document to you to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a margin account. Before trading stocks in a margin account, you should carefully review the margin agreement provided by your firm. Consult your firm regarding any questions or concerns you may have with your margin accounts.

When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from your brokerage firm. If you choose to borrow funds from your firm, you will open a margin account with the firm. The securities purchased are the firm's collateral for the loan to you. If the securities in your account decline in value, so does the value of the collateral supporting your loan, and, as a result, the firm can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with the member, in order to maintain the required equity in the account.

It is important that you fully understand the risks involved in trading securities on margin. These risks include the following:

• You can lose more funds than you deposit in the margin account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to the firm that has made the loan to avoid the forced sale of those securities or other securities or assets in your account(s).
• The firm can force the sale of securities or other assets in your account(s). If the equity in your account falls below the maintenance margin requirements, or the firm's higher "house" requirements, the firm can sell the securities, or other assets, in any of your account(s) held at the firm to cover the margin deficiency. You also will be responsible for any short fall in the account after such a sale.
• The firm can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. Most firms will attempt to notify their customers of margin calls, but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a margin call, the firm can still take necessary steps to protect its financial interests, including immediately selling the securities without notice to the customer.
• You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call. Because the securities are collateral for the margin loan, the firm has the right to decide which security to sell in order to protect its interests.
• The firm can increase its "house" maintenance margin requirements at any time and is not required to provide you advance written notice. These changes in firm policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause the member to liquidate or sell securities in your account(s).

You are not entitled to an extension of time on a margin call. While an extension of time to meet margin requirements may be available to customers under certain conditions, a customer does not have a right to the extension.

Full Electronic Communications Disclosure:

All electronic communications transmitted through Pali Capital, Inc.'s computer network are archived in accordance with regulatory requirements and are subject to review and retrieval and may be disclosed to parties other than the intended recipient. This document neither constitutes, nor is to be construed as an offer to buy or sell any security. It does not take into account the particular investment objectives, financial situation or needs of individual clients. All market prices, data and other information are not warranted as to completeness or accuracy and are subject to change without notice. Email should not be used to transmit orders for securities or for any time-sensitive matters. Pali and/or its affiliates may, in the normal course of business, act as a market-maker or principal for its own accounts or as agent for another party in connection with the purchase or sale of a security which may be mentioned in this email.

This communication may contain information that is legally privileged, confidential or exempt from disclosure. No confidentiality or privilege is lost or waived by mistransmission. If you are not the intended recipient, please notify the sender via return email immediately and delete this message from your system. Disclosure, use, distribution or copying this message, any attachments thereto or their contents is strictly prohibited.

Securities Products

None of the information contained on this Web site constitutes a recommendation, solicitation or offer by Pali Capital, Inc. or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. The information contained in this Web site has been prepared without any reference to any particular user's investment requirements or financial situation. Certain transactions give rise to substantial risk and are not suitable for all investors. Prior to the execution of any transaction by you involving information you received from this Web site, you should consult your business advisor, attorney and tax and accounting advisors with respect to the price, suitability, value, risk, or other aspects of any stock, mutual fund, security or other investment. Pricing and other information generated through the use of data or services made available herein may not reflect actual prices or values that would be available in the market at the time provided or at the time that the user may want to purchase or sell a particular security or other instrument. The information and services provided on this Web site are not provided to and may not be used by any person or entity in any jurisdiction where the provision or use thereof would be contrary to applicable laws, rules, or regulations of any governmental authority or regulatory or self-regulatory organization or clearing organization or where Pali Capital, Inc. is not authorized to provide such information or services.

Options Trading:

Options involve risk and are not suitable for all investors. Options trading is considered speculative and it is possible to lose a portion, all of your initial investment, or funds in excess of the principle invested. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options (ODD). Copies of the ODD are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, Illinois 60606. The information in this Web site is provided solely for general education and information purposes and therefore should not be considered complete, precise, or current. Many of the matters discussed are subject to detailed rules, regulations, and statutory provisions, which should be referred to for additional detail and are subject to changes that may not be reflected in this text. No statement within the Web site should be construed as a recommendation to buy or sell a security or to provide investment advice. The inclusion of the NASD membership in this Web site should not be construed as an endorsement or an indication of the value of any product or service.

Some products described on this Web site may not be available to investors in the U.S. or the U.K. Please contact your local office for specific details.

SIPC Disclosure

Pali Capital, Inc., a member of the Securities Investor Protection ("SIPC"), provides account protection for the net equity of a customer's funds and securities positions. SIPC provides $500,000 of primary net equity protection, including $100,000 for claims for cash ("SIPC Coverage"). Visit www.sipc.org for more information about SIPC Coverage. Account protection applies when a SIPC member firm fails financially and is unable to meet its obligations to its securities customers, but does not apply to losses from the rise or fall in the market value of investments or to SIPC ineligible assets such as futures, foreign exchange transactions, or any investment contracts that are not registered as securities.

Use in the United Kingdom (U.K.)

This Web site has been approved by Pali International Limited solely for the purposes of Section 21 of the Financial Services and Markets Act 2000.

Privacy Statement:

Pali Capital, Inc., and our affiliates have the utmost respect for our customers' privacy, and we are highly committed to protecting your privacy. In furtherance of this commitment, we are providing our individual customers with this privacy statement, and the opportunity to direct us not to provide certain nonpublic personal information to our affiliates and other third parties.

The Types of Information We Collect about You:

Pali Capital, Inc. collects nonpublic personal information about you from: information we receive from you on applications or other forms; the transactions you have participated in with us, our affiliates, or others; and, from information we receive from a consumer-reporting agency.

The Types of Information We Disclose about You:

We may disclose all of the information we collect, as described above, to companies that perform marketing services on our behalf, or to other financial institutions with whom we have joint marketing agreements. We may also disclose the information as described above, and as permitted by law, to our affiliates. Our affiliates are those parties who, directly or indirectly, hold common ownership with Pali Capital, Inc. We treat nonpublic personal information about former customers in the same manner, and with the same care that we do our current customers. We only disclose nonpublic personal information about those former customers who had an opportunity to opt out.

Your Right to Opt Out:

Other than those disclosures permitted by law, you may direct us not to disclose nonpublic personal information about you to: our affiliates; to companies that perform marketing services on our behalf; or to other financial institutions, with whom we have joint marketing agreements. If you wish to do so, you may fill out the opt out form enclosed, and mail it to the address provided.

Our Information Security Policies:

In order to protect the confidentiality and security of the nonpublic personal information that Pali Capital, Inc. gathers from you, access to that information is restricted to select members of our staff. These select staff members are privy to said information on a need to know basis, only to the extent necessary to fulfill your requests and provide you with the best service possible. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information.

Business Continuity Planning:

Pali Capital, Inc. ("Pali") has developed a Business Continuity Plan on how we will respond to events that significantly disrupt our business. Since the timing and impact of disasters and disruptions are unpredictable, we will have to be flexible in responding to actual events as they occur. With that in mind, we are providing you with this information on our business continuity plan.

Contacting Us — If after a significant business disruption you cannot contact us as you usually do at +1 212 259 2060, please call 866 650 PALI or go to our Web site at www.palicapital.com. If you cannot access us through those means, you should contact our clearing firm, Pershing LLC at +1 201 413 3575 for stock orders, +1 201 413 4880 for fixed income orders or www.netxpro.com to log into your account.

Our Business Continuity Plan — We plan to quickly recover and resume business operations after a significant business disruption and respond by safeguarding our employees and property, making a financial and operational assessment, protecting the firm's books and records, and allowing our customers to transact business. In short, our business continuity plan is designed to permit our firm to resume operations as quickly as possible, given the scope and severity of the significant business disruption.

Our business continuity plan addresses: data backup and recovery; all mission critical systems; financial and operational assessments; alternative communications with customers, employees, and regulators; alternate physical location of employees; critical supplier, contractor, bank and counter-party impact; regulatory reporting; and assuring our customers prompt access to their funds and securities if we are unable to continue our business.

Our clearing firm, Pershing LLC, backs up their important records in a geographically separate area. While every emergency situation poses unique problems based on external factors, such as time of day and the severity of the disruption, we have been advised by our clearing firm that its objective is to restore its own operations and be able to complete existing transactions and accept new transactions and payments within a reasonable time frame. Your orders and requests for funds and securities could be delayed during this period.

Varying Disruptions — Significant business disruptions can vary in their scope, such as only our firm, a single building housing our firm, the business district where our firm is located, the city where we are located, or the whole region. Within each of these areas, the severity of the disruption can also vary from minimal to severe. In a disruption to only our firm or a building housing our firm, we will transfer our operations to a local site when needed. In a disruption affecting our business district, city, or region, we will transfer our operations to a site outside of the affected area. In either situation, we plan to continue in business, transfer operations to our clearing firm if necessary, and notify you through our Web site www.palicapital.com or our customer emergency number, +1 866 650 PALI (7254) on how to contact us. If the significant business disruption is so severe that it prevents us from remaining in business, we will assure our customer's prompt access to their funds and securities.

For more information — If you have questions about our business continuity planning, you can contact us at +1 212 259 2000.