AN INFORMATIVE SNAPSHOT OF TIMOTHY MORGE, TRADING ADVISOR FOR BLACKTHORNE CAPITAL, INC.

Blackthorne Capital, Inc. was founded in 1991 by Timothy Morge. He began his career as a currency trader at Harris Bank, in Chicago. He left Harris to become the Chief Trader at the First National Bank of Chicago, now known as Bank One; three years later, he was made Senior Manager of the Foreign Exchange business line. In 1989, Mr. Morge was named Managing Director of a newly created business unit, Proprietary Trading. In this new position, he was responsible for trading performance and risk management of an internal portfolio worth in excess of US $2 Billion. The Proprietary Trading unit changed into a subcorporation of First Chicago in 1993 and Mr. Morge was named Managing Director, Senior Partner and Head of Trading of the new entity, First Chicago Trading Consultants.

Mr. Morge started college at 16 years of age, receiving his education from the University of Chicago's Graduate School of Economics in a joint Master of Science and Bachelor of Arts degree program. His focus was higher-level mathematics and physics. While at the Graduate School of Economics, he worked with Professor Victor Zarnowitz and the Bureau of Labor Statistics on a U.S. GNP benchmark revision study while pursuing his degree. He left the University of Chicago to work as an economist under Dr. Beryl Sprinkel at Harris Bank in Chicago. At that time, Dr. Sprinkel was a key advisor to Ronald Reagan, who was running for President. Mr. Morge was brought in to forecast the Federal Budget and the possible impact of Reagan's proposed policies on the budget deficit. When Dr. Sprinkel left Harris Bank to join President Reagan's Cabinet, Morge left to take a position in Harris Bank's trading area.

Mr. Morge employs the help of Gary Fritz in researching the validity of his proprietary trading methodologies. Gary Fritz has been programming computers since 1973 and developing automated trading systems for almost five years. His forte is in programming mechanical trading systems. Mr. Fritz has been Mr. Morge's Director of Research since October 2001. He has consulted on research projects for the Advisor since 1999. Mr. Fritz earned his degree in Computer Engineering (with high honors) from Iowa State University. Prior to his trading career, Mr. Fritz worked for Hewlett Packard Company. During his 12 years at HP, he developed software, did training and field support for HP's first release of Unix (HP-UX), and managed several software projects. In 1991 he left HP to start a consulting business.

THE NASDAQ TRADING PROGRAM (NTP) The NTP is exclusively offered through Introducing Brokers affiliated with Vision, L.P. Although newly available to the public, NTP employs the same trading principles, and strategies, as in Mr. Morge's, "Lucida Combined Index Program," with the addition of newly refined methodologies, designed to further reduce volatility.

After over 15 years of intensive research, experimentation, and three years of trading managed accounts, Mr. Morge believes his trading methodologies and strategies work best in the Nasdaq. Correspondingly, the NTP will solely focus on the Nasdaq, seeking to capitalize on its volatility, by taking both long and short positions in the E-Mini Nasdaq futures contract. Most of the positions are day trades, with only a limited number held overnight. The program's emphasis is on capital preservation through capital appreciation, and conservative risk management. Mr. Morge believes the NTP represents the culmination of his professional career.

The NTP is technical in nature, and derived from extensive research into stock market acceleration, momentum, and velocity studies, as they apply to swing statistics. It was derived from studies of energy flows in the marketplace, as pioneered by Dr. Alan Andrews, Roger Babson and George Marechal. Mr. Morge refined these building block principles with his own ongoing research, applying his findings in trading the E-Mini Nasdaq futures contract.

Mr. Morge is currently writing a book on his trading approach entitled, "Trade Simple, Trade Smart".

In order to learn more about Mr. Morge, here are excerpts from an interview that was conducted with him by Trend Dynamics Labs, a renowned Journal for Professional Stock and Futures Traders.

Mr. Morge, As A Floor Trader

I left the bank in 1991 to form a CTA. I managed offshore money for a large commodity pool until 1994. In 1995, I took a break for a few months, then leased a seat on the CME. I had always wanted to try trading on the floor, and now with the pits disappearing, I'm glad I took the time to try it. It was a fascinating experience and I am still amazed how much work it takes to stand in the pit jammed among several thousand other traders looking to ply their edges. Besides quick thinking and discipline, it takes a great deal of physical stamina. After five months, I found I was trading as much off-floor as I was in the pits, so I did not renew my lease and I returned to my trading office at home.

What did you learn on the floor that helps you trade off-floor today?

The first thing I learned was the value of preparation and just how outstanding some of the floor traders really are. It's amazing how well prepared the great traders are before they step into that pit each morning. Something else I learned is the importance of becoming content with what the market has to offer. For example, the first trading manager I worked for got a huge bonus and left to go trade on the floor in the currency pits. He was there for about 18 months, eventually leaving to work for Morgan Stanley in New York.

The next time I saw him, I asked him why he went back to the institutional world. I didn't really understand his answer until I traded on the floor myself. He said, for the first few months on the floor, he was making a great living by "finding dollar bills on the floor all day long." And after three or four months, he would start to "find a few five-dollar bills and even a ten-dollar bill here and there on the floor." Life was great. After nine months, he started to "find fives and tens more often." After the first year, he didn't even bother looking at the one-dollar bills, and just spent all his time looking for fives and tens. And then he quit looking for fives. Soon, thereafter his trading had deteriorated to the point where he wasn't effective as a floor trader any longer. In other words, traders often get bored or dissatisfied with what the market has to offer.' Another thing, when I worked for institutions, I thought of myself as a purist -and had some mystical idea that I could lose money on a trade and still have performed great because I lost money but performed as well as I could on that trade set up. So if I was long, and the market broke and I did a great job cutting my losses, I'd take solace and perhaps even pride in knowing I did a great job cutting the loss. That's just nonsense. To me, a losing day is a losing day. Everyone has them, but there's nothing good about them, other than their utility as learning experiences. Each day I try to remember that the exercise is to make money. I'm not there to entertain myself or amaze my clients. I'm there to keep adding to the trading kitty.

Where did you go after you left the floor?

I visited some of my institutional contacts and landed some offshore, unregulated money to manage again. I continue to manage institutional money, as well as trade my own capital. Lately, my trading has focused on trading the U.S. stock index futures, though I still take swing positions in U.S. T-Bonds and currencies.

What's the physical layout of your trading room?

I have a large "L" shaped trading desk configured with three main stations. One component is a Dell twin-Pentium III with a single 21" monitor that serves as my on-line/internet computer. This is where I retrieve e-mail, do research using MS-Excel and other math-crunching tools. I also create charts using Advanced GET Real-time and maintain a Fibonnaci retracements and projections database. This station also has a real-time version of TradeStation 4.0 running using a Quote.com data feed.

A second workstation is comprised of a Dell server with twin 21" monitors. This machine runs E-Signal and Tradestation 4.0 and is my main data server. Its function is to capture data in TradeStation 4.0 and run TradeStation charting and a proprietary model I use to trade.

My third workstation, a Dell Pentium IV with twin 21" monitors, runs TradeStation 4.0 and CQG (Commodity-Quote Graphics) from a dedicated phone line feed. This is my back-up data and quote source. The proprietary model is also mirrored here in case the main server has a data problem. I also run several MS-Excel spreadsheets that crank out real-time indicators from this machine. While trading, I am usually sitting in front of the first workstation, watching and charting using Advanced GET RealTime. I generally move back and forth between the 13" and 39" day-session only charts of E-mini Nasdaq and E-mini S&P 500 futures. My electronic execution platform is also on this first machine. The second machine is on the same desk to my right and I usually have a window with a set of quotes updating on the screen closest to me and a cash NDX (Nasdaq 100) chart up with the model's current position and statistics on the second screen.

The third station is on a second desk. I generally have a second quote screen on one of its twin monitors and a few of the spreadsheet generated applications on the second screen. These applications provide information like a real-time Nasdaq 100 cash index generated tick-by-tick from each stock's real-time tick activity, my own version of advances and declines, etc.

How do you prepare for a typical trading day?

My data collection and charting regimen is quite rigorous. Immediately after the T-Bonds and currencies close on the International Monetary Market (IMM exchange) at 2:00 PM CST, I begin to update charts.

I keep hand-posted daily, weekly and monthly charts for the following: U.S. T-Bond futures, a 30-year U.S. yield chart, cash and futures Dollar/Yen, cash and futures Dollar/Swiss, cash and futures Sterling and cash and futures Dollar/ EuroFX. I've been keeping these charts by hand since the early 1980's.

I also update a database on each of these instruments with swing highs and/or lows that may have been made that day, as well as upcoming daily, weekly and monthly support and resistance. I use a simple tool, Fibnodes, developed by Joe DiNapoli, that calculates a range of Fib relationships. I feed it minor and major swing highs and swing lows and it generates a sheet for me for the next day's trading. I use this to locate areas where there is a confluence (multiple counts of) support or resistance.

How would you describe your money management guidelines?

I always have a stop in place. I rarely risk more than 2 percent of capital on a position and that stop is rarely hit. I like to take money off of the table and once trades become profitable and I have some time invested in them, I am careful to keep the trades from turning into losses. If I violate my trading rules, I always take a minimum of three trading days away from the markets--to clear my mind. I would always rather under-leverage than over-leverage. I like to trade about 1 E-mini S&P for every $15K [about 5 to 7:1 leverage -Ed. ]. I also use what I call equivalent risk, meaning that I keep a spreadsheet matrix with current ATR-based (average true range) volatility for the instruments I trade. If I trade 15 bonds, according to that matrix, it is equal to X number of S&Ps or X number of currency contracts. I adjust the size of the trades so that the risk for any one position equals a maximum of 2 percent of capital. The use of stop loss orders may not limit losses or protect profits to the intended amounts because certain market conditions may make it difficult or impossible to execute such orders.

Do you have other trading rules?

I always try to take trades with good trade location. If I can't get a trade location that's ideal, I generally pass on the trade. If I do take a trade with trade location that is acceptable, but not as ideal as I originally planned, I trade with less leverage. I never take trades where I can't define both the stop area that is acceptable and at least one area that is a good logical profit objective. Never chase price. There will always be another trade setup. When I am not in rhythm with the market, I don't trade. Forcing trades is one of the worst sins. Time invested in trades is expensive. If a trade is becoming stale and not progressing as I thought it would when I put the position on, it's best to go flat. Being flat can be a much more creative state of mind, and stale trades just tie up your capital and your mind.

Finally, if I don't feel good, I don't trade. And I mean emotionally good, physically good--any distractions mean that I am not at my very best. And to trade these markets day in and day out, I have to be ready, with good tools and a good mind.

How important are psychology issues, mental attitude, etc.?

Mental attitude is extremely important. If I feel defeated, I am defeated. Attention to detail and being well-prepared springs to mind as other things affected by your mental state. I might add that it's very difficult to go from trading money for the house to being the house, that is, to trading your own cash. I used to tell traders that worked for me that if they were busy worrying about making the mortgage payments, they'd never trade successfully. I saw it nearly every year as young traders approached bonus time and they and their wives started mentally planning how they'd spend their soon-to-come bonus--and the pressure would mount on them not to lose money. That killed many young traders at banks, and even more on the floor of the exchanges.

*SPECIAL DISCLOSURE

Risk Factors & Discussion of Blackthorne Capital, Inc. ("BCI") CTA Program

1. A complete discussion of fees and charges are reported in BCI's disclosure document. Specifically, one should recognize that the introducing broker may charge a front-end start-up fee of up to 10% of the initial contribution. Please note that this charge is not reflected in the performance of the Commodity Trading Advisor.

2. Although BCI has achieved and reported many profitable periods and years, one must recognize that drawdowns have and do occur. Recovery from drawdowns can vary and may last for substantial periods. Investors with short-term investment horizons should especially be aware of these facts.

3. The basic strategy of the BCI's Program is to potentially achieve profits by trading futures contracts. One must be aware that the possibility of unlimited loss exists in futures trading.

4. As you read and study the disclosure document and related materials on BCM, you must recognize that, in reference to any stated return, past performance is not necessarily indicative of future results.

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