December, 2009

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• Research-driven investment philosophy.• Focus on intrinsic business value.• Multiple approaches to valuation.• Bottom-up portfolio construction.• Disciplined decision process.

Independent thinking can lead to better investment performance.

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Investment Philosophy

Three key attributes:1. High-quality businesses trading at a discount to

intrinsic value.2. Businesses whose value will grow over time.3. Honest, capable management teams that think

and act like owners.

Would you want to own the whole business? If not, don’t buy the stock.

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Price and Value Converge Over Time

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Time

Value VALUE PRICE

Identify stock at a discount to value.

Value grows over time.

Stock rises as price/value gap closes.

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Example: H&R BlockInformation as of 12/31/09. Not intended as a recommendation.

• High returns on capital near 20%.• Strong free cash flow due to low capital needs.• Tax complexity, pricing power and new office

openings drive revenue growth.• Tax business alone worth more than current stock

price.• Activist shareholder forced changes in

management.• New management team focusing on core business.

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Portfolio Management

• Avoid over-diversification by holding 20-30 securities.

• Full range of market capitalization, no artificial limits.

• Weightings reflect risk, confidence in outcomes.• Long-term time horizon reduces turnover.• Asset allocation based on needs of client.• Conservative bond portfolio reduces credit and

interest rate risks.

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Representative Equity Portfolio

Industry holdings are based on clients portfolios as of 12/31/09. Holdings are subject to change and are not intended as recommendations.

Industry holdings are based on clients portfolios as of 12/31/09. Holdings are subject to change and are not intended as recommendations.