OBJECTIVE

The Primary Trend System® adapts to changing markets® by seeking capital appreciation in during periods of favorable money flows into the stock markets, combined with capital preservation during periods of unfavorable money flows.

PERFORMANCE OBJECTIVE

The performance objective of The Primary Trend System® is to equal or surpass the total return of the Standard & Poors 500 Index* while only being exposed to stock market risk between 4-8 months per year.

INCEPTION DATE

May 7, 1999

CONCEPT

Supply and demand is basic elements of investing. Excess demand pushes prices up and excess supply pushes prices down. However what drives these supply and demand factors – in our opinion, the most primary of all trends – is money flows into and out of the markets. There is no demand to drive up prices unless there is money to invest. Our research has shown us that strong money flows tend to accompany strong markets and weaker money flows often lead to weaker markets. We have found that certain indicators can tell us when these Primary Trends are changing, and therefore when conditions are more favorable or less favorable for investing.

THE EDGE PROVIDED TO OUR INVESTORS

Investments directed using this elegantly simple strategy are moved into diversified stock mutual funds during periods of favorable money flows and into the relative safety of money funds during unfavorable periods. To enhance performance we look for the “sweet spot” in the markets by using momentum analysis software to identify the strongest of eight different market segments and directing investments accordingly. If pricing action is contrary to the money flow indicators, hedging positions may be used. This unique software was developed by our founder, Will Hepburn, and is one of the trade secrets behind each of the investment strategies at Hepburn Capital Management, LLC.

SUITABILITY

The Primary Trend System® is designed for investors who are risk averse, yet still want growth in their investments. This less active strategy uses a flexible mix of diversified stock mutual funds and money market funds. Investments managed this way should experience one or more buys and sells each year.

TAX CONSIDERATIONS

Gains or losses from this strategy are expected to qualify for short-term tax treatment. This strategy may be implemented in taxable accounts at the client’s request, but it is especially well suited to annuity, IRA or other retirement plan accounts.

FEES AND ACCOUNT MINIMUMS

This service is offered on a fee-basis only, with fees calculated on a sliding scale that ranges from .75% to 2.5% annually, based upon account size. Account minimums are $100,000. Your financial advisor can provide you with an exact fee estimate.

OTHER CONSIDERATIONS

Implementation of the Primary Trend System® involves the use of mutual funds. Owning shares of mutual funds involve risk, including the possible loss of the principal amount invested. Investment returns and principal will fluctuate so that your shares, when redeemed may be worth more or less than their purchase price. The Primary Trend System® can invest in both long and short positions, and thus may lose or make money regardless of market direction. Leverage may be used which can increase potential profits and losses. Because the account will not be continuously invested it may miss some profitable market days. Past performance of any investment or investment strategy is no guarantee of future results.

Despite our efforts to capture and quantify these key financial and economic relationships, our knowledge about many of the important linkages is far from complete and in all likelihood will remain so. Every investment model, no matter how detailed or how well designed, conceptually and empirically, is a vastly simplified representation of the securities markets with all its intricacies and variables. Consequently, even with large advances in computational capabilities and greater comprehension of economic linkages, our knowledge base is barely able to keep pace to keep pace with the ever increasing complexity of our global markets.

*The Standard and Poors 500 Index is an unmanaged index of 500 large and mid cap stocks considered representative of the U.S. economy. It may not accurately reflect the performance of the entire stock market. At times this strategy will invest in securities that are not included in this index. Investors cannot invest directly in the Standard and Poors 500 Index. There can be no assurance that this objective will be met.

The Primary Trend System® is a Fee-Based Program offered by William T. Hepburn, an Investment Advisor Representative with Hepburn Capital Management, LLC, a Registered Investment Advisor. The Primary Trend System® and Adapting to Changing Markets® are registered trademarks of William T. Hepburn.