Renaissance eee RIEF experienced modest, postive gains in May in all Series. Nonetheless, the S&F 500 meaningfully cuspertoemed RIEF for the third month in a row, RIEF is expected to underperform dramatic monthly gains in the index but its isappointing that we did not capture a larger faction of the market gain, RIEFs performance can again be understood in terms ofits risk aversion, The recent, unusually large return differential between high and low beta stocks continued butat sls pronounced pace in May, Consequently, RIEF continued to underperform the index but experienced improved absalute and relative performance campared to both March and, especially, Apri RIEF helps investors control rsk through lower volatility and diversification ancy from indes-lke investments, Such civersfication naturally leads beth to Pio ofhamatc au performance, auch aalent yeu end ped of dramatic erformance, such as this year. The patient RIEF investor has been and continue 10 be rewarded with higher average return and lower risk than s Sechevebie tre ‘conventional long-only investing, Research was productive in May. We installed a new predictive signal of unusually high statistial signficance and diseavered ancther promising signal thet vill be explored further the coming weeks. We are stiving to improve both the quantity and quality of the information hired with ur ivastors. We understand that investors can adopt a lena term view of RIEF only if they have sufficent information to understand that shortterm disappointments do nct necessarily reflect fundamental probleens twith the underiving evategy. Que first stp tana improved ranepareney ie aF improved monthly investor letter, Along with increased disclosure of portfolio statistics, you willfind = more in-depth and precise discussion of the drivers of monthly performance. May 2009 (page 1) Gross Sector Allocation’ escNrin 7 I 8 Teter ‘FREaieatg iseemettoneels Monthly Statisties IEF Onstore LLC Nay Benen ore ours jenscriten?| 34% 29k AS 4508 Saran Devation” — 1070R OSHA 10338 Delt AO RTE, one, Risk/ Return Since Inception” * > q3 mes ~ is ooh a po ix a - * 7 om om om mm om | om, IEF Cochore LP om Oee Sue Som Sab a sas NR 11S vat 17 ome aI - (One-Year Rolling Standard Deviation” FELPELRLLPEERELLE ce ewan, 7, “thane eae meh cts anae net fees fora conning kaso: Same ai new nat populate wth ivasioanee Incepdn, The reals dypleyed ae, [oneheos, bose on acl cea stow pra beteaacred ech ase ye apa es. Fhe arann Pra of BEF andthe SEPEQD since napsRenaissance | The volatility and beta controls of RIEF favor lower volatiltylower beta stocks in the long portfolio and Fiigher volasity/highor beta stocks in tho short portfolio. This feature has helped RIEF maintain low volatility both in its live track record since inception and during simulation since 1992. Honever, this very feature has been a key driver of relative underperformance versus the S&P 500 over the past 3 months. " During the months of Mareh, April, snd May, high beta stocks outperformed low beta stocks to an Uuncharactoristic extent. Using Barra betas, we bucketed all of the stocks in our trading universe into beta decries. By taking cap-weighted average betas and multiplying by actual SRP returns [demonstrated by the solid black line on the graphs to the right, higher beta stocks would have Been expected te outperform lower beta stocks by roughly 405%. However, in these past three months those same higherbeta stocks (dotted line} have in fact outperformed by # margin of 120%. This 3efold difference indicates a short-term phenamenon that we bolieve is unsustainable, Jat the same time, it gooy makes RIEF's recent underpertarmance understandable. A similar irend was evidert during calendar year 1799, May 2009 ipage 2) Returns by Beta Decile’ Period: March 2009 = May 2009" ° same eines teens Actual Reta by Bats Dace SS eegnot ange Eopscted Ronan Period: January 1999 - December 1999" another yoar in which RIEF' simulations dramatically underperformed the index. Over the next year all of those relative losses were recouped, om (Gross Long/Short Return Attribution” ox 708 0m rr ‘Quarterly Market Cap Exposure’ | PEeEERETESE ores! a a are oo eo 8 Fe 68 ek me espe Average Act Retr ty Bets Deets hoahiod Average Expected Ret Three-Year Rolling Empirical Beta’ sage ptt PEPE