BE SELECTIVE

The first step in our process is to identify those few businesses that offer predictable, sustainable earnings growth. Our experience has shown that specific characteristics increase the probability that a company will sustain growth with low business risk over the long term:

Pricing Power

The best businesses have the power to establish prices at levels that consistently provide good profit margins and strong returns on invested capital. This is often associated with a strong franchise, a proprietary position, a low-cost position or a powerful brand. In an increasingly competitive global environment, these companies tend to be more profitable and gain market share.

Repeat Revenues

We look for companies whose products and services are used frequently and replaced regularly. It is easier for a company to grow if it begins each year with a core constituency of loyal customers already in the habit of buying its products and services. These companies are more predictable and less vulnerable to fluctuations in economic activity, and many have demonstrated an ability to grow earnings through all economic cycles.

Global Reach

Companies with global reach are not limited to one particular region for growth. They have the ability to expand operations across borders because the products and services they provide have no inherent geographic or cultural limitations. Their long-term growth prospects are more sustainable because of the global scope of their market opportunity.

BE DILIGENT IN RESEARCH

Our research is proprietary and involves first-hand analysis of the quality of each business, its financial dynamics and its growth potential. We continually test our investment concept through regular contact with management, by monitoring competitors and by tapping into industry information sources. We solidify our assumptions of a company's sustainable growth by constructing detailed financial projections. Finally, our work involves ongoing evaluations of the investment case through discussion in our Investment Committee, where we marshal over 50 years of combined investment experience.

BE PRUDENT IN VALUATION

We are disciplined in determining an appropriate price for our holdings and guarding against valuation risk. We determine fair value by discounting future earnings and cash flow and measuring Enterprise Yield, our calculation of the free cash flow that is truly available to investors as a percentage of the company's market value. This helps to ensure that our clients can earn a competitive risk-adjusted return and enables us to identify attractive opportunities to build or trim positions. Purchase and sale decisions for all portfolios are made jointly by the three Principals of the firm.