Fee-based Portfolio Management Our fundamental approach to client portfolio management is based upon a number of core beliefs. Among these is that markets tend to be efficient over long periods of time. As a result, during most periods portfolios will generally benefit from core positions focused on broad diversification and low cost. We also believe that while it is impossible to eliminate risk, broad diversification helps reduce the possibility that an unforeseen negative event will seriously damage the overall portfolio. Our several decades of cumulative investment experience have demonstrated to us that highly concentrated positions, frequent trading, and high costs pose an unnecessary challenge to the long-term success of clients’ portfolios. Therefore we believe that clients should diversify across asset classes, markets, countries, and maturities. We utilize a top-down approach to developing strategic allocation models for our clients. Target allocations are determined according to the time horizon and risk profile of clients. In keeping with our belief in the importance of low cost and broad diversification, we primarily use mutual funds and exchange traded funds (ETFs) for our core client positions. We then seek to increase return, reduce risk, or meet income needs by overweighting to sectors which we believe have the potential to add value to client portfolios or underweighting those sectors we view less favorably. Client risk tolerance permitting, we may periodically add alternative investments such as real estate funds, long/short funds, arbitrage funds, commodity funds, and market neutral funds. In larger client accounts, we may also use individual bond positions or hold individual stocks. While we believe that over long periods of time markets tend to be efficient, there are infrequent periods of serious inefficiency when extreme values present themselves. It is during those periods that we may significantly increase our allocation to what we believe is an undervalued sector. Our experience has been that when it comes to markets, patience truly is a virtue for those who are investors and not speculators.