We have been involved with the management of investments for many years. During this time, we have found it to be much more likely that an investor with a sound investment plan will enjoy greater success than will the investor with no plan other than to get rich from investments. As market conditions change, we anticipate that we may change some of the things we are doing to implement our plan for the investment of your funds; we do not anticipate changing our plan.

INVESTMENT PLAN

PRIMARY EMPHASIS — INCOME WITH GROWTH

We seek to provide our clients with the comfort and security derived from owning a value-oriented, balanced-investment, endowment-like investment fund that generates regular, predictable, and increasing cash payments.

VALUE ORIENTED means to us that we try to not pay too much for the items we are purchasing; in fact, we often purchase items while others are selling as this allows us to buy these items at what we believe are temporary sale prices. With investments, if you are going to buy low and sell high, most often you must be buying when others are not.

BALANCED-INVESTMENT means to us that we try to not have too much of your funds invested in any one holding, while also emphasizing the areas of the Market that we believe will do well and limiting exposure to areas that we believe will not do well. As you might imagine, the areas are regularly changing, and sometimes these changes happen with great speed and intensity. We seek to structure investment portfolios so that our clients will be receiving income from a great variety of stocks and bonds, thereby limiting their exposure to the problems of any one area of the Market while also providing the flexibility to increase holdings in those areas that indicate the likelihood of good fortune. In so doing, we normally hold investments that are expected to continue to offer regular and predictable income, and to reduce risks, we seek to diversify your holdings from which the income is paid. A review of a typical client portfolio may reveal the following type holdings:

• Bonds and other debt with fixed-rate or floating-rate interest issued by:

• US Government and/or its Agencies
• Foreign Governments and/or their Agencies
• US Businesses
• Foreign Businesses
• Municipalities

ENDOWMENT-LIKE means to us that we plan to purchase securities that are normally expected to be held for extended time periods as long as they are expected to continue doing what the primary reason for their purchase was. For the bulk of longer-term holdings, this will be investment assets that are expected to generate regular, predictable, and increasing income while in many cases also offering good opportunity for capital appreciation; these holdings comprise the INCOME WITH GROWTH portion of your portfolio. Other longer-term holdings are expected to emphasize the stability of regular income payments; these items comprise the INCOME portion of your portfolio. We also purchase longer-term holdings to provide additional growth to your portfolio by their expected capital gains through their rise in value and subsequent sale; these holdings comprise the GROWTH portion of your portfolio.

We seek to invest the bulk of your funds in longer-term, endowment-like assets that we believe will provide regular and predictable cash payments during both up and down investment markets. In doing this, we plan to continue investing the bulk of your investment funds in assets that we believe will provide consistent growth to your endowment-like investment fund.

Our primary goal is to build and maintain an endowment-like investment fund that generates growth through the receipt and reinvestment of regular, predictable, and increasing cash payments.

Our secondary goal is to seek to provide additional growth through the receipt of periodic realized capital gain payments.

Simply stated, as we select investments to achieve the primary goal of regular, predictable, and increasing cash payments, we are continuing to seek to buy assets that we believe will also enjoy increases in their market price.

As the amount of cash payments derived from your investments continues to increase, we believe this serves to enhance your ability to take advantage of opportunities presented in GOOD Markets while also significantly increasing your ability to weather the discomforts of BAD Markets.

Market conditions may change frequently. Our investment experience suggests that investment assets which continue to pay increasing cash payments quite often also enjoy rising market prices.

While our overall emphasis is to purchase securities that we anticipate will enjoy increases in their market prices and result in gains for your investment fund, the GROWTH portion of your investment fund’s portfolio holds those securities for which we purchased with the specific intent to buy low & sell high on your behalf. Normally, these securities offer little or no regular or predictable cash payments, and as such, we believe these holdings are purchased with the intent of speculation rather than investment.

Speculation and Investment are different; and, in our opinion, neither is more or less appropriate than the other. We believe there is a difference in their meanings. Generally, if you buy an asset with the intent to profit from your holding of the asset, and the primary way you expect to profit is by selling the asset for more than you paid for it, and you receive little or no income during the holding period, then we believe you are speculating rather than investing. Likewise, if you buy an asset with the intent to profit from your holding of the asset, and the primary way you expect to profit is by receiving anticipated income payments while you hold the asset, and you expect to sell the asset for approximately the same or greater amount than paid for it, then we believe you are investing rather than speculating. Special considerations impact the decision to purchase growth securities, and the regular receipt of predictable cash payments is normally not included; the prospect for significant capital gain is normally the major consideration. The decision to purchase the asset is graded on if and how quickly the asset increases its market price following its purchase.

Growth-oriented assets are normally not purchased to be held; they are purchased to be sold. If the right asset is purchased at the right price under the right conditions at the right time, and then sold at the right price under the right conditions within the right holding-period of time, then such speculation may be worth the added risk associated with its lack of regular or predictable cash payments.

While our investment plan places greater emphasis on seeking to hold securities that offer regular, predictable and increasing income payments, we believe most investment portfolios should also hold a portion of funds in growth-oriented, speculative assets. As conditions warrant, we plan to selectively continue purchasing growth-oriented assets for your investment fund with the intent of generating capital gains through their sale.

As these assets typically pay little or no regular or predictable cash payments, we do not expect them to constitute the majority of your investment fund’s total portfolio.

Many investment experts advise us that things will get better and that investors in the stock and bond markets will enjoy significant good fortune and profit; many advise us that things will get worse and that investors in the stock and bond markets will suffer significant price declines. We listen to the arguments made by experts, and consider the points they stress as we make decisions regarding the management of our clients’ investment funds.

While we have our opinion as to what we think will happen in the near future, we do not know what will happen. We believe no one knows what will happen in the future, even though many experts profess to tell us otherwise. We believe the world is a big place, and that there are innumerable variables affecting economic, financial, political, and social conditions which ultimately impact the status of our investment assets.

Our belief is that the Markets will do well over time. By this, we mean the long-term investor who remains invested in good investments will do well over the long-term. We believe the Markets will continue to go up over the long-term. This is why we are investors. This does not mean that we believe the Markets will always move upward; there is great history to show us that Markets may move upward or downward for extended periods of time. While there are many who tell us what the Markets have done, we do not know anyone who can perfectly forecast what Markets will do and when they will do it. Since we do not know what the future brings, we prefer to have the bulk of our funds invested in securities that we believe will prosper in GOOD Markets and also help protect us in BAD Markets.

GOOD Markets require little comment, because few clients worry about the investment markets being too good. It is BAD Markets that cause us the greatest concern. History indicates that both GOOD and BAD Markets are temporary. Our experience indicates that GOOD Markets last for long periods of time, and that BAD Markets last for short periods of time; and that when BAD Markets arise, they are always replaced with GOOD Markets.

We prepare for friendly Markets by building and maintaining endowment-like investment funds that seek to continue to produce regular, predictable, and increasing cash payments while also providing opportunities for growth through capital gains. We prepare for unfriendly Markets by building and maintaining endowment-like investment funds that continue to produce regular, predictable, and increasing cash payments while also providing opportunities for growth through capital gains. We believe what we do for one works for the other. Following this plan provides the cash flow that allows clients a ready and dependable source of cash payments if additional cash is needed to meet expenditures; and, if not needed, the cash payments may be used to fund the purchase of additional investments to generate additional cash payments while providing for future additional gains.

Various components of the different investment marketplaces are regularly changing from what they were. to what they are. and to what they will be. Life is uncertain, and how we react to the uncertainty associated with changing conditions can be important. Uncertainty is inherent with any investment; this is the nature of investing. Uncertainty may create concern for investors due to fear of the unknown, but uncertainty may also create opportunity for investors. We seek opportunities to purchase items for your endowment-like investment fund that offer good immediate cash payments and/or good probabilities for significant gains.

We place great emphasis on increasing the amount of regular and predictable income expected to be provided by investments. We believe the primary function of wealth is to provide the comfort and security that is derived from using the income produced by this wealth. This is what we think well constructed endowment-like investment funds are supposed to do for their owners.

We will continue to seek to provide our clients with the comfort and security that their endowment-like investment funds will generate regular, predictable, and increasing income payments irrespective of the current conditions of the investment marketplace. Whether in GOOD MARKETS or BAD MARKETS, we seek to. 1. preserve invested capital 2. provide for increasing income payments 3. provide added growth through capital gains.