INVESTMENT METHOD

BASE manages accounts in four distinct categories. Preservation and Growth accounts operate with a limited universe primarily of equities that meet certain quality criteria. Balanced accounts operate similarly except that they have a fixed income requirement. Growth accounts operate similar to Preservation and Growth except that the quality criteria is removed. Capital Appreciation accounts operate similarly to Growth except that the Capital Appreciation universe of securities is limited to those with some positive insider activity prior to the time of purchase.

Diversification is important for all accounts – both in terms of investment concept and of individual securities. Growth, value, turnaround, cyclical and workout securities are all used in varying degrees to diversify by investment concept. Each of these concepts uses different fundamental analytical methods to arrive at an opinion of attractiveness. Initial purchases of a security are limited by a consistent percentage of an account; and, multiple securities of a single issuer are limited in aggregate to that same percentage. Attention is paid to diversification by industry and type of business.

Risk is a constant companion to investment. BASE follows a probabilistic approach to risk taking. Clients will regularly enjoy the benefits of taking risk as well as endure the costs of taking risk. A probabilistic approach reduces the focus on the result of individual securities so that the aggregate benefits of taking risk can be realized. Diversification is wide enough so that very few single events will affect accounts much, and attention is paid to offsetting fundamental characteristics of individual securities in order to limit excess risk. While BASE selects securities by forming an opinion on each one individually, it measures success more on an aggregate than on an individual result of that process. Risk, whether realized or not, is incurred economically in pursuit of returns. Clients may prefer to limit their risk taking; the four categories of accounts, cited above, provide a range of choice.

Market participants determine the prices of securities. While BASE selects securities based on its opinion of fundamental factors, fundamental factors and market participants operate differently. Crowd psychology and distress frequently create high and low prices, respectively, of securities whose fundamental factors have changed relatively little. While both fundamental factors and prices are constantly changing, prices usually change much more rapidly. This disconnect between fundamental factors and price creates opportunity that BASE attempts to exploit. BASE purchases securities based on fundamental factors and an attractive price. When securities are popular, BASE will rely more on technical supply-demand factors to make sales. There is a significant area between these extremes where BASE may form both a fundamental opinion and a technical opinion, and have to decide which is more important given the circumstances.

The US Dollar is the home currency for all of BASE's activities. BASE deals primarily in equities as well as US Treasury securities in balanced accounts. It will purchase any security of an issuer including bonds or warrants if that security has analytical advantages. BASE will deal in exchange-listed securities, over-the-counter securities and securities of foreign issuers. BASE considers itself to be a value investor in the manner of a verb rather than that of a noun. It is focused on a wider range of securities than value securities. BASE is primarily a long term purchaser of securities; however, BASE will not exclude, per se, any method of dealing in securities, mutual funds, options, futures, derivatives, including trading or margin that both meet client objectives and BASE's analytical objectives; however, BASE will not accept accounts whose primary goal it is do these other things. BASE does not typically use mutual funds, other than money market funds, as they frequently create both analytical confusion and extra cost.

Sources of information available to and used by BASE include publicly available sources (Bloomberg, the financial press, OSCAR and many internet sites), contact with company executives (forums, conferences, websites and telephone), contact with other professionals both in and out of the investment field and client contact where many important observations and clues are realized. BASE will not sign away its ability to trade securities in exchange for information about those securities under SEC Reg. FD. Trading a security while in possession of material non-public information is prohibited both by law and BASE's internal procedures.

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