Investment Philosophy

Winter Harbor Advisors applies an investment philosophy in selecting securities for client portfolios that emphasizes a focus on identifying companies with long-term growth potential whose securities trade at prices below what the firm judges to be their "intrinsic" value. The concept of intrinsic value suggests that the securities of all firms have an inherent value based solely on the operations and assets of the respective company. Intrinsic value is evaluated through fundamental securities analysis although such analysis does not produce a point estimate of the value of a security but rather a sense (or range) of its value. This intrinsic value can then be compared to the market price of the respective security to arrive at an objective conclusion as to whether or not the security represents a promising investment. In making this comparison, the "margin of safety" concept, which describes the difference between the estimated intrinsic value and the market price of the security, plays a material role. In theory, a larger margin of safety allows for greater error in the fundamental securities analysis and estimation of the intrinsic value and thus offers greater protection to the investor, thereby reducing investment risk.

Although our investment philosophy may be traditionally characterized as value investing, we believe our approach encompasses more than is typically included in the phrase based upon the belief that value and growth are not mutually exclusive investment objectives and that all value investors are fundamentally seeking companies with long-term growth potential which are undervalued by the securities markets. The investment philosophy employed by Winter Harbor Advisors, the basic structure of which is outlined below, has been refined over the last several years through the construction and management of the investment portfolio of our parent, Getz & Associates, Incorporated.

Based on our internal fundamental securities analysis and research, Winter Harbor Advisors selects individual securities for inclusion in our "core" portfolio which, in essence, represents the firm's current "best investment" ideas. Generally, client portfolios are concentrated in the individual securities selected for the "core" portfolio although Winter Harbor Advisors adjusts and augments these securities to reflect the individual preferences, objectives, and risk tolerance of each client by, among other things, making specific determinations on securities to be included in or excluded from the client portfolio, changing the relative weightings of the securities in the client portfolio, and supplementing these securities with other investment securities identified through fundamental securities analysis yet which are not represented in the "core" portfolio.

The following description of our investment philosophy provides additional insight into the mechanics of our approach.

Philosophy

We seek consistent investment returns through long-term holdings when selecting securities and constructing client portfolios. We rely on a value-oriented investment philosophy which seeks both intrinsic value and potential growth with a corresponding margin of safety.

Winter Harbor adheres to a value-oriented investment philosophy that emphasizes a combination of intrinsic value and growth potential.

Securities Identification and Research

We identify potential investment opportunities through a variety of methods, including field research and observation, comprehensive market reviews, competitor analysis, industry identification, and quantitative and qualitative securities screens, among others.

Companies are evaluated and analyzed initially on an individual basis. Winter Harbor applies fundamental analysis to select potential investments. In general, fundamental analysis uses financial measurements to assess the financial and operational performance of a company individually as well as relative to competitors.

We use both quantitative and qualitative tools to analyze potential investments. Quantitative tools may include financial analysis, ration analysis, financial modeling, and operations modeling, among others. Qualitative tools may include consideration of macroeconomic and industry factors affecting the business and evaluation of management, among others. Our evaluation may also include site visits and meetings or discussions with company management. We do not use macroeconomic models or sector allocations to select investments or develop portfolios.

Winter Harbor identifies potential investments from a variety of sources. Winter Harbor applies both qualitative and quantitative principles to select securities for client portfolios and allocates selected securities to client portfolios based on each client's risk profile.

Security Sale Principle

We apply a sell principle to determine when an investment should be sold. In general, our sell principle requires either an adverse fundamental (versus temporary) change in a company or its market or an unjustifiable valuation. A fundamental change in the nature of a company or its market is characterized by a structural change which will be persistent (non-reversing). As a result, we are willing to accept short-term market price declines in the absence of an adverse fundamental change in a company or its markets.

Winter Harbor seeks adverse fundamental changes in the nature of a company or its markets or unjustifiable valuation for sell indications.

Portfolio Construction & Management

When constructing client portfolios, we seek to achieve consistent returns over time through long-term holdings rather than large one-time gains or short-term successes. We believe this approach offers the best approach to achieving each client's individual long-term goals.

Client portfolios are actively managed yet not actively traded. By minimizing trading, we minimize transactional costs and leverage the most value from our long-term investment philosophy.

Client portfolios consist primarily of “long” positions in equity and fixed income securities. Specific portfolio composition is based on the risk profiles and objectives of the respective client. For certain clients, and under specific circumstances, we may incorporate other strategies into client portfolios, including “short” positions in equity securities, call or put options, and “long” or “short” positions in futures, derivatives, or other alternative investments. However, we do not extensively employ such other strategies for client portfolios. From time to time, we may also incorporate other investment instruments, such as mutual funds, when we believe such instruments provide a more cost-effective approach than individual securities selection, as is frequently the case for international securities.

We select securities for inclusion in individual client portfolios based on the risk profile and investment objectives of the respective client. Thus, portfolio diversification is client dependent. Diversification will play a larger role in highly risk-averse client portfolios and less of a role in less risk-averse client portfolios. Since we seek promising opportunities on an individual basis, when appropriate, concentrations in specific industries may develop within a client portfolio when we believe a set of companies within an industry present a unique opportunity.

Winter Harbor constructs client portfolios using long-term investment principles to achieve long-term client objectives. Our investment philosophy emphasizes “long” positions in equity and fixed income securities. Portfolio concentrations may occur when the company believes it has identified a unique opportunity, reducing diversification.

Performance Evaluation

We generally do not use benchmarks to evaluate portfolio performance. Due to the unique composition of each client's portfolio, a comparable index or standardized portfolio is often unavailable. Our emphasis on achieving reasonable and consistent returns year after year places more importance on long-term results than intervening period results. In addition, we focus on attempting to achieve the absolute returns required to reach each client's objectives. The Dow Jones Industrial Average and S&P 500 Index do not have long-term client objectives to meet.

Winter Harbor works to achieve client objectives, not to beat arbitrary market benchmarks. Therefore, we focus on absolute results rather than benchmark comparisons in evaluating performance.