OBJECTIVE

The Bond Protection Strategy seeks capital preservation for fixed income investments in both rising and declining markets..

PERFORMANCE OBJECTIVE

The performance objective of The Bond Protection Strategy is to equal or surpass the total return of the income investment selected by the client with less risk over complete interest rate cycles.

INCEPTION DATE

May 18, 2004

CONCEPT

Since rising interest rates can hurt bond values the Bond Protection Strategy is a way for investors to keep their fixed income investments and the income they produce, while attempting to substantially cushion principal values in times of rising interest rates. The objective of this strategy is to reduce risk using a strategy called “hedging”. During bond market declines HCM managers shift a portion of the account into investments that grow in times of rising interest rates (the hedge) to preserve account values during these periods. During up-trends (generally periods of declining interest rates) or stable interest rate environments, the hedges will be removed to capture the potential for principal growth.

The amount of money devoted to the hedge varies and is calculated to offset the historical price volatility of the investments to be hedged.

Municipal bonds, government bonds, corporate bonds and the mutual funds that hold them all can be hedged with The Bond Protection Strategy.

THE EDGE PROVIDED TO OUR INVESTORS

Investors can continue to reap the steady income fixed income investments are known for, while no longer having to worry about principal erosion caused by rising interest rates. We feel that by Adapting to Changing Markets ®, Hepburn Capital Management provide our clients a significant advantage over ordinary buy and hold investing with The Bond Protection Strategy.

SUITABILITY

The Bond Protection Strategy is suitable for investors seeking capital preservation or the growth that compounding interest can provide.

CUSTODIAN

The custodian for this strategy is National Financial Services, LLC, Rydex Mutual Funds or American Skandia Variable Annuities.

TAX CONSIDERATIONS

The tax character of current investments (tax free interest, taxable interest, etc.) is unchanged by this strategy. Gains or losses from the hedging portion of this strategy are expected to qualify for short-term tax treatment.

FEES AND ACCOUNT MINIMUMS

This service is offered on a fee-basis only. The investment management fee for this strategy ranges from ½% to 1.0% annually. Account minimums are $250,000.

OTHER CONSIDERATIONS

Implementation of the Bond Protection 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. Please read our disclosure document, SEC form ADV, Part II before investing.

The Bond Protection System invests 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.

Despite our efforts to capture and quantify the key financial and economic relationships relating to this objective, 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 with the ever-increasing complexity of our global markets. *The Lehman Aggregate Bond Index is an unmanaged index measuring several categories of investment considered

representative of the entire bond market. It may not accurately reflect the performance of individual segments of bond market. At times this strategy will invest in securities that are not included in this index. Investors cannot invest directly in the Lehman Aggregate Bond Index. There can be no assurance that this objective will be met.

The Bond Protection System is an investment advisory service offered by Hepburn Capital Management, LLC, a Registered Investment Advisor. Adapting to Changing Markets® is a registered service mark of William T. Hepburn..