PHILOSOPHY - CONTRARIAN VALUE INVESTING

The Fund will adhere to a Contrarian Value Investment Strategy which focuses on investing in out of favor and undervalued securities.

The Contrarian Value Strategy is a discipline that refers to investing in securities that are out of favor and undervalued. A contrarian mindset is necessary to look at out of favor areas of the market. Usually out of favor securities are in the least popular areas of the market, surrounded by controversy and investor sentiment is negative. Typically with fewer investors analyzing a security or sector, there is a greater chance that share price inefficiencies and under-valuation exist in the short term. Investors frequently overreact to current economic, company and industry information leading to hastily made investment decisions. These decisions may cause a particular security, industry group or entire market to become undervalued in the short-term.

Among such investments the Fund will emphasize is the purchase of small, medium, and large capitalization U.S. common stocks. The Fund will typically invest in common stocks, although it may also invest in other equity securities; preferred stocks, convertible bonds, convertible preferred stocks and foreign stocks. In addition, the Fund retains the flexibility to invest in fixed income securities; investment grade corporate bonds, below investment grade (junk) corporate bonds, U.S. treasury bonds, foreign government bonds and REITS.

The Adviser believes that the price you pay for an investment is very important to the long-term return of that investment and to minimize permanent loss of capital. The Adviser will concentrate research efforts in areas of the market that are currently out of favor in order to find undervalued securities. Also, the Adviser believes that investors continually overreact by overpaying for the most popular stocks while discounting the unpopular stocks. It is these extreme swings between optimism and pessimism, just like a pendulum, that is used to build long-term capital appreciation. This is the Contrarian aspect of the strategy.

The Adviser will then focus on those securities that trade at a discount or reasonable price to various fundamental valuation criteria. The Adviser believes the following undervalued characteristics are important in the security selection process:

*Freecashflow/Cashflow
*Current as well as anticipated future levels of earnings
*Book Value or replacement cost of assets
*Private Market Values/Franchise Value
This is the value aspect of the investment strategy.

The Adviser will maintain a proprietary list of potential investment securities that meet strict valuation criteria that become potential candidates for future purchase. In order to be included in the Fund, each security will go through a rigorous Four Step Investment Process in order to determine its long-term investment viability. The Adviser will intensify and increase its interest in a security in the face of negative price action.

The Four Step Investment Process is the following:

1. Complete Financial Statement Analysis/Financial Integrity - The Adviser will analyze the 10k annual report, the 10q quarterly report, the proxy and the accompanying footnotes to these SEC documents of the company. This in-depth analysis will allow the Adviser to have the conviction in the company's financial strength and flexibility to weather a difficult environment.

2. Industry Dynamics - The Adviser will analyze the current competitive landscape in the Industry. The Adviser prefers to invest in companies that possess a leading competitive position in an industry that has a growing long-term outlook within a reasonable pricing environment, has products or services that provide real value to the customer and are not faddish in nature and have at least some barriers to entry.

3. Overall Management Strategy - The Adviser searches for high quality management teams that make prudent operating and capital allocation decisions to grow the underlying value of the business. Also, they want management teams that treat shareholders like partners and have a vested stake in the company.

4. Analyst Sentiment - The Adviser looks at analyst estimates and ratings preferably when downgrading and upgrading. The market reactions to these rating changes are used to the Fund's advantage when acquiring or liquidating a position.

Once a position is acquired, constant research and monitoring follow throughout the holding period. As with accumulation, selling is also price stimulated. When a security approaches what the Adviser considers a fully valued price, then a sell strategy will begin. The Adviser will seek to maximize gains by selling into strength. In cases where the stock moves ahead of the fundamentals the Adviser may sell a portion of the position to stay disciplined with current valuations. Also, if the initial assumptions regarding a company are invalid or inaccurate, the Adviser will sell out the entire position. The Adviser tends to be fully invested. However, when there is a lack of good values based on our investment strategy, then cash reserves may increase to higher than normal levels. Cash is only invested when undervalued opportunities that meet our disciplined Contrarian Value Strategy are found. In difficult markets, the Adviser may find select trading opportunities for short-term profits.