Our investment philosophy is grounded in a top-down, sector based approach. Each manager is responsible for a specific sector, based on the Global Industry Classification Standard (GICS) sectors. Our managers work to determine the viability of each sector over a five-year period, and focus on the best mid- to large-cap companies in each sector. Where necessary, the fund goes over or underweight sectors.

Managers begin by examining their specific sector. In this challenging economic climate, we evaluate sectors based on several macroeconomic factors. These include, but are not limited to, the following:

• Interest rates
• Inflation
• Unemployment
• Global GDP growth
• Dollar Valuation
• Consumer Strength
• Government Intervention

Qualitative analysis of these factors on individual corporations’ operating business models provides fertile ground for proper assessment of the future earnings and returns.

Managers next move to finding undervalued stocks in their sector. We seek to invest in companies that we believe are undervalued at least 15%; have strong cash flows, consistent earnings and a proven business model; and are expected to outperform the S&P over a five-year span. Managers combine Free Cash Flow valuation, financial ratio analysis, and business model analysis to determine the quality of investment options. Investment metrics include the following:

• Operating Cash Flow
• Operating Margins
• Return on Assetts
• Return on Equity
• Price/Earnings
• Price/Sales
• Price/Earnings Growth
• Debt/Equity

When combined and properly vetted, both quantitative and qualitative approaches yield a well-diversified portfolio of investments intended to outperform the S&P over a five-year horizon. We believe that our top-down focus is particularly well suited for these demanding times.