Energy Portfolio Series 3

The Trust consists of 41 stocks classified as being in the energy sector by Standard & Poor’s (“S&P”) Global Industry Classification Standard (“GICS”). The Trust is diversified across the energy sector to include the following industries: oil and gas drilling, oil and gas equipment and services, integrated oil and gas, oil and gas exploration and production, oil and gas refining and marketing, oil and gas storage and transportation and coal and consumable fuels. The Sponsor selects stocks for the Trust that it believes have the potential to achieve the Trust’s investment objective.

See “Investment Policies” in Part B of the prospectus for more information.

The Sponsor selects stocks of domestically-traded companies that it believes are core holdings of a well-diversified energy portfolio. To select the portfolio the Sponsor follows a very disciplined process which includes both quantitative and qualitative analysis. The Sponsor begins with the approximately 270 companies that are traded on U.S. exchanges and are classified as being in the energy sector. The Sponsor then reduces the 270 companies to approximately 150 by performing quantitative screening which may be based primarily on factors such as, but not limited to:

• Valuation. The Sponsor may screen for reasonably valued companies based on measures such as price-to-earnings, price-to-book, and price-to-cash flow.
• Growth. The Sponsor may screen for companies with a history of better than average growth of revenues and earnings.
• Profitability. The Sponsor may screen for companies with a history of consistent and high profitability as measured by return-on-assets, return-on-equity, gross margin and net margin.

The Sponsor then reduces the remaining 150 companies to 41 by performing qualitative analysis based on factors such as, but not limited to:

• Balance Sheet. The Sponsor favors companies that possess overall financial strength and exhibit balance sheet improvements relative to their peers and the marketplace.
• Industry Leadership. The Sponsor favors companies that possess a strong competitive position among their domestic and global peers.
• Valuation. The Sponsor favors companies whose valuations appear to be attractive based on measures such as price-to-earnings, price-to-book, and price-to-cash flow.
• Growth. The Sponsor favors companies with a history of (and prospects for) better than average growth of revenues and earnings.
• Profitability. The Sponsor favors companies with a history of (and prospects for) consistent and high profitability as measured by return on assets, return on equity, gross margin and net margin.

As with all investments, you can lose money by investing in this Trust. The Trust also might not perform as well as you expect. This can happen for reasons such as these:

• Stock prices can be volatile. The value of your investment may fall over time. Market value fluctuates in response to various factors. These can include stock market movements, purchases or sales of securities by the Trust, government policies, litigation, and changes in interest rates, inflation, the financial condition of the securities’ issuer or even perceptions of the issuer.
• The Sponsor does not actively manage the portfolio. The Trust will generally hold, and may continue to buy, the same stocks even though the stock’s outlook, market value or yield may have changed.
• The Trust invests in stocks issued by small-capitalization and mid-capitalization companies. These stocks customarily involve more investment risk than stocks of large-capitalization companies. Small-capitalization and mid-capitalization companies may have limited product lines, markets or financial resources and may be more vulnerable to adverse general market or economic developments.
• Share prices or dividend rates on the stocks may decline during the life of the Trust. There is no guarantee that the issuers of the stocks will declare dividends in the future and if declared, whether they will remain at current levels or increase over time.
• The Trust invests in ADRs and U.S listed foreign securities. The Trust’s investment in ADRs and U.S listed foreign securities presents additional risk. ADRs are issued by a bank or trust company to evidence ownership of underlying securities issued by foreign corporations. Securities of foreign issuers present risks beyond those of domestic securities. More specifically, foreign risk is the risk that foreign stocks will be more volatile than U.S. stocks due to such factors as adverse economic, currency, political, social or regulatory developments in a country, including government seizure of assets, excessive taxation, limitations on the use or transfer of assets, the lack of liquidity or regulatory controls with respect to certain industries or differing legal and/or accounting standards.
• The Trust includes securities issued by companies in the energy sector. Companies in the energy sector are subject to volatile fluctuations in price and supply of energy fuels, and can be impacted by international politics and conflicts, including the war in Iraq and hostilities in the Middle East, terrorist attacks, the success of exploration projects, reduced demand as a result of increases in energy efficiency and energy conservation, natural disasters, clean-up and litigation costs associated with environmental damage and extensive regulation.
• Inflation may lead to a decrease in the value of assets or income from investments.