Our philosophy encompasses three key principles:

• We believe the market is merely an extension of capitalism and it attempts to take as much from as many for as long as it can.

• While other managers construct their portfolios with the stocks they consider to be the best on the market relative to other stocks, we look at each individual stock relative to cash and try to determine each stock's probability of profitability on a risk adjusted basis. We will invest in a stock only if we believe it has a better than average chance to provide a profitable return based on current economic conditions, our position in the market cycle and the fundamentals of the individual stock.

• Our investment approach is both qualitative and quantitative and dictates that there is a time and place in the market cycles for each company represented in the portfolio--market cycles and the nature of capitalism reveal this. In essence, this is an active top-down and drill-up process relying heavily on coefficient correlations at each level of the portfolio construction/management process.

Our decision-making process on each stock and on the weighting of the entire portfolio is based on our five axioms.