3. Investment Portfolio Vision It is the goal of the Straight Line Opportunity Fund to achieve positive returns regardless of market conditions. Returns should be uncorrelated to the market. Risk should be managed on both the upside and downside. Performance should be benchmarked against an absolute return expectation. Investment opportunities are managed on a relative basis.

4. Agenda Background Focus Sorting Model – Investor Behavior Example 3 Step Process – Model Results – Due Diligence – Risk Management Projections

5. Low Correlation/Low Volatility Markets Straight Line Opportunity Fund Graph is not of actual performance. The intention is to show the goal of the Straight Line Opportunity Fund through market cycles.

6. The Universe

8. Factors and Families RiskDebtProfitability Market BetaInventory Turnover ( Δ )Gross Profit Margin Inflation BetaReceivables EfficiencyGross Profit Margin (Δ) Earnings VolatilityWorking Capital ( Δ )Net Profit Margin 10yr-FF spreadCurrent RatioNet Profit Margin (Δ) Cash RatioReturn on Assets TechnicalCredit RatingReturn on Assets (Δ) Momentum (MACD) 12ma vs. 26maDebt RatioReturn on Equity Short Interest RatioDebt/TangEquity ( Δ )Return on Equity (Δ) 1 month return vs. SP500TIEEarnings Quality ( Δ ) CFO/Oper Inc 12 month return vs. SP500TIE ( Δ )Income Quality (Accruals) CFA 1 month returnCFO/Total DebtSales/Assets ( Δ ) 12 month returnCapital Investment ( Δ ) % SalesSales Acceleration Price/52 week highCash+Mrkt Sec -LT Debt/CAP ValuationInvestorCorporate Decisions Price/EarningsDividend YieldR&D Expenditures Price/Earnings ( Δ )Dividend ( Δ )Insider Buying/Selling Price/CFOPayout RatioCorp Governance Quotient Price/CFO (Δ)Dilution from OptionsSales G/Inv G Price/Sales (Δ)Analyst Coverage ( Δ )Inside Ownership Price/B.V. (Δ)Grahm&Dodd FormulaInstitutional Ownership Earnings Growth 1yrSustainable GrowthEVA Spread (ROIC-WACC) Earnings Growth 2 yrAltman Z-score'Buyback (∆ in float) P/E/GAltman Z-score''Audit Integrity PEG (∆)Audit Integrity FCF/CAPEarnings Surprise DriftLiquidity Yield Adjusted PEG (G+Yield)Analyst Earnings RevisionsMarket Capitalization P/B*P/ECash Conversion CycleTrading Volume/Market Cap

9. The Formula Score= α + (ω * F 1 ) + (ω * F 2 ) + (ω * F 3 ) + (ω * F 4 ) + ……. (ω * F 75 ) + Є Modern Finance Behavioral Finance AccountingTechnologyHedging

10. Quant Analysis + Investor Intuition Example How does a traditional stock screen view the Debt/Equity ratio vs. how does investor behavior view the ratio D/E Less is betterThere is an optimal range

11. Curve of Intuition GPM∆ Float TIE P/E ∆ DividendCurrent Ratio

12. STEP # 1 Relative Valuation

13. Data Sources 5 Years of Annual Statements 5 Quarters of 10-q’s Short Interest Data Insider Transactions Technical Price Information Analyst Ratings/Estimates

14. 500 Companies μ= 0 σ=20 20 Companies

15. STEP # 2 Due Diligence

16. Speak with Management Adjust for off balance sheet items Macro forecasting Customers and Competitors Legal Issues Review all SEC filings

17. Industry Comparison Forward Looking Analysis Threat of Substitutes Threat of New Competitors Intensity of Rivalry Bargaining Power of Customers Bargaining Power of Suppliers

18. STEP # 3 Optimize the Hedge

19. Armed with what the model and due diligence tell us are the best and worst companies: Maximize Returns and Minimize Risk Buy Write – Covered CallsBear Credit Spreads Profit Premium Risk Protection Limit Profits Limit Losses

20. Performance The three step process has been developed in the context of a comprehensive portfolio. Each step is designed to work with the others to filter out good investment opportunities from bad. Every investment made has passed all three stages. Our Target Performance is consistent reasonable returns.