We use a five-step, bottom-up methodology to identify companies in which to invest and monitor.

Step 1: Identification
Through a broad screening process, a company is identified as a potential investment. Companies considered for inclusion in the portfolios must have strong fundamentals and a long history of rising dividends and earnings.

Step 2: Research and Analysis
Our research and analysis include:

•	careful assessment of the company and industry
•	complete examination and analysis of financial and technical documents
•	analysis of competitors, customers and suppliers

Step 3: Valuation and Margin of Safety
Using information obtained from our research and analysis, we estimate the company’s intrinsic value, or what we think its assets and cash flows are worth. A comparison is then made between our estimate of intrinsic value and the company’s current market value.

Margin of safety, or a discount to intrinsic value, is of paramount importance to us. If it does not exist, we will not invest, no matter how compelling a company’s fundamentals may appear.

Step 4: Investment Decision and Asset Allocation
A final decision is made. Any potential investment must be expected, in our view, to deliver an above average rate of return over time.

If we decide to invest, an asset allocation policy is developed. Our asset allocation policy is shaped by two primary factors:

• risk (potential for permanent capital loss)
• estimated rate of return on the investment

If we would like to make an investment at a lower price, we exercise patience by setting a target entry level and waiting for the opportunity to make a timely, yet thoroughly researched and carefully considered investment decision.

Step 5: Continuous Monitoring
We routinely monitor the various fundamental factors that affect the value of both existing and potential investments. This enables us to remain informed about any material developments and to make the immediate, yet well-educated decisions required.